Question 1

Harris Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on October 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention? A) $3,500 and $138 B) $2,500 and $426 C) $1,500 and $706 D) $500 and $958

Accepted Answer

The answer of Harris Corporation (a calendar-year taxpayer), acquired a...

Question 2

When fully depreciating 7-year property, the final year of depreciation will be year:
A) 5
B) 6
C) 7
D) 8

Accepted Answer

Under the Modified Accelerated Cost Recovery System (MACRS), which is used in the United States to depreciate property for tax purposes, the final year of depreciation for 7-year property actually extends into the 8th year. This is because MACRS uses a half-year convention for most property, meaning only a half-year's worth of depreciation is claimed in both the first and last years of the recovery period.

Question 3

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-Joe started a new business this year. He had purchased a computer two years ago for $4,000 and decided to use it in his business until he could afford a new system. He could purchase a new computer with the same specifications for $1,800, but his used computer is worth only $1,100. What is his computer's basis for depreciation?
A) $1,100
B) $1,800
C) $4,000
D) The computer cannot be depreciated because it was a personal asset.

Accepted Answer

The answer of Other Objective Questions
Indicated by a P for...

Question 4

All of the following are acceptable conventions for MACRS property except:
A) Mid-week
B) Mid-month
C) Mid-quarter
D) Half-year

Accepted Answer

Mid-week is not an acceptable convention for MACRS property. The acceptable conventions are mid-month, mid-quarter, and half-year.

Question 5

The only acceptable convention for MACRS realty is
A) Mid-week
B) Mid-month
C) Mid-quarter
D) Half-year

Accepted Answer

The only acceptable convention for Modified Accelerated Cost Recovery System (MACRS) realty is the mid-month convention. This convention assumes that all property placed in service or disposed of during a month is placed in service or disposed of at the midpoint of that month.

Question 6

The first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are:
A) $4,000 and $1,152
B) $2,858 and $892
C) $2,000 and $576
D) $1,428 and $1,428

Accepted Answer

Using the MACRS depreciation table for 7-year property under the half-year convention, the depreciation percentages are as follows: 14.29%, 24.49%, 17.49%, 12.49%, 8.93%, 8.92%, 8.93%, and 4.46%.

To calculate the first-year depreciation, we take 14.29% of the asset's cost: 
$20,000 x 14.29% = $2,858.

To calculate the last-year depreciation, we take 4.46% of the asset's adjusted basis (which is the cost minus all previous depreciation): 
$20,000 - $2,858 - $4,901 - $3,449 - $2,154 - $1,355 - $747 = $4,536 
$4,536 x 4.46% = $202. 
So, the last-year depreciation deduction is $202.

Therefore, the first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are $2,858 and $202, respectively. The best answer option is B.

Question 7

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-The adjusted basis of an asset is:
A) Its acquisition price only
B) Acquisition cost less cost recovery
C) Acquisition cost less selling price
D) Only the cash used to purchase the asset

Accepted Answer

The adjusted basis of an asset is its acquisition cost less cost recovery. This includes any depreciation or amortization taken on the asset. It does not include any selling price as that would be the amount received from selling the asset, not the adjusted basis. The adjusted basis is used to calculate the gain or loss on the sale of the asset. It is not just the cash used to purchase the asset.

Question 8

During the year, Garbin Corporation (a calendar-year corporation that manufactures furniture) purchased the following assets:  In computing depreciation of these assets, which of the following averaging conventions will be used?
A) Half-year and mid-month
B) Mid-quarter and mid-month
C) Half-year, mid-quarter, and mid-month
D) Mid-quarter only

Accepted Answer

The assets listed are all depreciable assets and under the Modified Accelerated Cost Recovery System (MACRS), the half-year convention is used for all assets (except for certain real property) in which the asset is considered to be placed in service in the middle of the tax year. Additionally, the mid-month convention is used to determine the depreciation for the first and last months of service for all assets. Therefore, the best choice for averaging conventions to be used for computing depreciation of these assets is A) Half-year and mid-month.

Question 9

Lopez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the last year for a 7-year asset acquired May 12 under the mid-quarter convention.
A) 1.09%
B) 3.33%
C) 5.53%
D) 7.64%

Accepted Answer

For a 7-year asset under the mid-quarter convention, the MACRS depreciation schedule dictates that in the final year (the 8th year due to the mid-quarter convention), the depreciation percentage is 3.33%. This is because the mid-quarter convention adjusts the depreciation rates to account for the quarter of the year in which the asset was placed in service, extending the depreciation period and altering the final year's depreciation rate accordingly.

Question 10

MACRS depreciation for 5-year assets is based on:
A) Straight-line depreciation
B) 150 percent declining balance only
C) 200 percent declining balance with a switch to straight-line
D) 200 percent declining balance only

Accepted Answer

MACRS depreciation for 5-year assets is based on 200 percent declining balance with a switch to straight-line depreciation. This means that the asset is depreciated at a rate of 200 percent of the straight-line rate (which would be 20 percent per year for a 5-year period) for the first four years, and then switches to straight-line depreciation for the fifth year.

Question 11

Useful lives for realty include all of the following except:
A) 25 years
B) 27.5 years
C) 39 years
D) 40 years

Accepted Answer

The answer of Useful lives for realty include all of...

Question 12

Other Objective Questions
Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions:
-Jack did not depreciate one of his machines that cost $40,000 because he had net operating losses for the last two years. Which of the following statements is true?
A) Jack's basis in the asset is $40,000 this year.
B) Jack can deduct three year's depreciation in the current year.
C) Jack must file amended returns to claim the depreciation for prior years.
D) If Jack sells the machine for $20,000 this year, he has a $20,000 loss.

Accepted Answer

The answer of Other Objective Questions
Indicated by a P for...

Question 13

Gonzalez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the first year for a 7-year asset acquired February 15 under the mid-quarter convention.
A) 25%
B) 17.85%
C) 10.71%
D) 3.57%

Accepted Answer

The answer of Gonzalez Corporation is a calendar-year taxpayer. What...

Question 14

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:
A) $2,000 and $2,000
B) $2,000 and $1,152
C) $2,000 and $576
D) $2,000 and $1,000

Accepted Answer

The MACRS system uses a half-year convention for the first and last years of depreciation. For a 5-year asset, the first year's depreciation is 20% of the cost, which is $2,000. The last year's depreciation is the same as the second to last year due to the half-year convention, which is $576 (11.52% of $10,000 in the fourth year, halved for the fifth year).

Question 15

On October 12, 2018, Wilson Corporation (a calendar-year taxpayer) acquires 5-year property for $9,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?
A) $1,800
B) $1,350
C) $900
D) $450

Accepted Answer

The answer of On October 12, 2018, Wilson Corporation (a...

Question 16

Moore Corporation (a calendar-year taxpayer), acquired a 5-year asset costing $10,000 on April 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention? A) $3,500 and $138 B) $2,500 and $426 C) $1,500 and $706 D) $500 and $958

Accepted Answer

Using the mid-quarter convention, the first year's depreciation is calculated as if the asset were placed in service in the middle of the quarter, which is July 1. So, for the first year, Moore Corporation can only take depreciation for 2 quarters or 50% of the cost of $10,000, which is $5,000. The depreciation for the first year will be $5,000 x 20% = $1,000.
For the last year, the depreciation will be calculated as if the asset were disposed of in the middle of the quarter, which is September 30. So, for the last year, Moore Corporation can only take depreciation for 3 quarters or 75% of the cost of $10,000, which is $7,500. The depreciation for the last year will be $7,500 x 1.98% = $148.50. 
Therefore, the first and last years of MACRS depreciation deductions using the mid-quarter convention will be $1,000 and $148.50, respectively. The closest choice is B.

Question 17

Conrad Corporation has a June 30 year end. What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.
A) 35%
B) 25%
C) 15%
D) 5%

Accepted Answer

The answer of Conrad Corporation has a June 30 year...

Question 18

When fully depreciating 5-year property, the final year of depreciation will be year:
A) 6
B) 5
C) 4
D) 3

Accepted Answer

The answer of When fully depreciating 5-year property, the final...

Question 19

MACRS means
A) Modified asset cost recovery system
B) Mid-year accelerated cost recovery system
C) Modified accelerated cost recovery system
D) Modified accelerated conventional recovery system

Accepted Answer

MACRS stands for Modified accelerated cost recovery system.

Question 20

On November 7, 2018, Wilson Corporation acquires 7-year property for $25,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?
A) $893
B) $1,785
C) $2,678
D) $3,573

Accepted Answer

The answer of On November 7, 2018, Wilson Corporation acquires...

Quiz 7: Property Acquisitions and Cost Recovery Deductions

Harris Corporation (a calendar-year taxpayer) , acquired a 5-year asset costing $10,000 on October 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

When fully depreciating 7-year property, the final year of depreciation will be year:

All of the following are acceptable conventions for MACRS property except:

The only acceptable convention for MACRS realty is

The first and last years of MACRS depreciation deductions for a 7-year asset costing $20,000 using the half-year convention are:

Other Objective Questions Indicated by a P for personalty, R for realty, or B for both personalty and realty which are subject to the following provisions: -The adjusted basis of an asset is:

During the year, Garbin Corporation (a calendar-year corporation that manufactures furniture) purchased the following assets: In computing depreciation of these assets, which of the following averaging conventions will be used?

Lopez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the last year for a 7-year asset acquired May 12 under the mid-quarter convention.

MACRS depreciation for 5-year assets is based on:

Useful lives for realty include all of the following except:

Gonzalez Corporation is a calendar-year taxpayer. What is the MACRS depreciation percentage deduction for the first year for a 7-year asset acquired February 15 under the mid-quarter convention.

The first and last years of MACRS depreciation deductions for a 5-year asset costing $10,000 using the half-year convention are:

On October 12, 2018, Wilson Corporation (a calendar-year taxpayer) acquires 5-year property for $9,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?

Moore Corporation (a calendar-year taxpayer) , acquired a 5-year asset costing $10,000 on April 2^nd. What are the first and last years of MACRS depreciation deductions using the mid-quarter convention?

Conrad Corporation has a June 30 year end. What is the MACRS depreciation percentage deduction for the first year for a 5-year asset acquired October 15 under the mid-quarter convention.

When fully depreciating 5-year property, the final year of depreciation will be year:

MACRS means

On November 7, 2018, Wilson Corporation acquires 7-year property for $25,000. This is the only property acquired this year and neither Section 179 expensing nor bonus depreciation were claimed. What is Wilson's total depreciation deduction for 2018?