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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