What is the maximum amount that can be spent on depreciable personalty in the last quarter of 2018 to avoid the mid-quarter convention if $240,000 of equipment was purchased in the first three quarters?
A) $80,000
B) $968,000
C) $160,000
D) $240,000

Question

Quizplus · Accepted Answer

According to the mid-quarter convention, if more than 40% of the depreciable property is purchased in the last quarter of the year, then the mid-quarter convention applies. Since $240,000 was purchased in the first three quarters, that means $360,000 ($600,000 - $240,000) can be purchased in the last quarter without triggering the mid-quarter convention (since $360,000 is less than 40% of the total depreciable property purchased for the year). Therefore, the maximum amount that can be spent on depreciable personalty in the last quarter without triggering the mid-quarter convention is $360,000 - $240,000 = $120,000. However, since the question is asking for the maximum amount that can be spent to avoid the mid-quarter convention, we need to spend just under $120,000. Therefore, the best choice is $160,000.

What Is the Maximum Amount That Can Be Spent on Depreciable