Question

Barbara's Bakery purchased three new 7-year assets last year. She chose NOT to use Section 179 immediate expensing or take bonus depreciation. The furnishings were purchased for $15,000 in April, the equipment for $6,000 in July, and the appliances for $40,000 in November. What amount of depreciation expense is allowable in the current (second) year of ownership?

a. $16,806
b. $14,939
c. $16,163
d. $16,072

Answer 1

b. $14,939

Step-by-step explanation:

Property placed in service in 1st year:

Amount $

2nd quarter 15,000

3rd quarter 6,000

4th quarter 40,000

Total furnishing at beginning of 2nd Year $61,000

Half Year depreciation rate in 2nd Year as per Macrs table under "7 years life" assets, the applicable depreciation in the 2nd year is 24.49%

Thus, amount of depreciation expense is allowable in the current (second) year of ownership = $61,000 * 24.49% = $14938.90