ACC_4301_Solutions_to_Problems_(Chapter_8)

# ACC_4301_Solutions_to_Problems_(Chapter_8) - PROBLEMS 31....

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PROBLEMS 31. Cost of asset \$100,000 Less: Greater of allowed and allowable cost recovery: 2007 \$ 455 2008 3,636 (4,091) Basis at the end of 2008 \$ 95,909 Less: Cost recovery for 2009 (\$100,000 × 3.636% × .5/12) (152) Basis on date of sale \$ 95,757 Gain on sale of asset (\$98,000 – \$95,757) \$ 2,243 p. 8-4 32. José’s basis for cost recovery is \$175,000 because the fair market value of the house at the date of the conversion from personal use to rental property (\$255,000) is greater than the \$175,000 adjusted basis. The cost recovery is \$5,038 [\$175,000 × 2.879% (Table 8.6)]. p. 8-5 33. Additional first-year depreciation (\$200,000 × .50) \$100,000 MACRS cost recovery [(\$200,000 – \$100,000) × 14.29%] (Table 8.1) 14,290 The property is 7-year property. Exhibit 8.1 \$114,290 pp. 8-5 to 8-8 34. a. The mid-quarter convention must be used. The office machine is 7-year class property. 2009 MACRS cost recovery [\$75,000 × .0357 (Table 8.2)] \$2,678 b. 2010 MACRS cost recovery {\$75,000 × [.2755 × (2.5/4)]} \$12,914 pp. 8-5 to 8-8 35. a. 2009 Additional first-year depreciation (\$200,000 × .50) \$100,000 MACRS (\$100,000 × 20%) (Table 8.1) 20,000 \$120,000 b. 2010 MACRS cost recovery [\$100,000 × 32% (Table 8.1) × 1/2] \$16,000 pp. 8-5 to 8-8 36. The mid-quarter convention must be used because the cost of the computers acquired in the 4th quarter exceeds 40% of the cost of all the personal property acquired during the year (\$60,000/\$140,000 = 43%). Furniture (7-year class) Additional first-year depreciation (\$50,000 × .50) \$25,000

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[(\$50,000 – \$25,000) × .1785] (Table 8.2) 4,463 Trucks (5-year class) Additional first-year depreciation (\$30,000 × .50) 15,000 MACRS cost recovery [(\$30,000 – \$15,000) × .15] (Table 8.2) 2,250 Computers (5-year class) Additional first-year depreciation (\$60,000 × .50) 30,000 MACRS cost recovery [(\$60,000 – \$30,000) × .05] (Table 8.2) 1,500 Total cost recovery \$78,213 pp. 8-5 to 8-9 37. a. The building was placed in service in October. 2009: \$3,700,000 × .00535 (Table 8.6) = \$19,795 b. 2013: \$3,700,000 × [.02564 × (6.5/12)] = \$51,387 pp. 8-10 and 8-11 38. The building meets the 80% gross receipts from dwelling units test. Therefore, it is classified as residential real property. The building’s depreciable basis is \$1,500,000 [\$2,000,000 (cost) – \$500,000 (land)]. \$1,500,000 × 2.576% (Table 8.6) = \$38,640 pp. 8-10 and 8-11 39. 2009: \$1,800,000 × .01605 (Table 8.6) = \$28,890 2019: \$1,800,000 × .02564 (Table 8.6) = \$46,152 pp. 8-10 and 8-11 40. The building’s depreciable basis is \$1,200,000 [\$1,400,000 (cost) – \$200,000 (land)]. a. 2009: \$1,200,000 × .0197 (Table 8.6) = \$23,640 b. 2015: \$1,200,000 × .03636 (Table 8.6) × 10.5/12 = \$38,178 pp. 8-10 and 8-11 41. The 150% declining-balance method must be used under these circumstances with a 5- year cost recovery period. MACRS cost recovery (\$80,000 × .15) (Table 8.4)
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## This note was uploaded on 02/19/2010 for the course ACC 3300 taught by Professor Lae during the Spring '10 term at Alabama A&M University.

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ACC_4301_Solutions_to_Problems_(Chapter_8) - PROBLEMS 31....

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