Suvi, Inc.purchased two assets during the current year (a full 12-month tax year).On August 10 Suvi placed in service computer equipment (five-year property)with a basis of $20,000 and on November 18 placed in service machinery (seven-year property)with a basis of $10,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation).(Use MACRS Table 1.)(Round final answer to the nearest whole number.)
A)$857.
B)$3,357.
C)$5,429.
D)$6,000.
E)None of the choices are correct.

Question

Quizplus · Accepted Answer

For computer equipment (five-year property), we will use MACRS Table 1, using the 200% declining balance method:

Year 1: 20% x $20,000 = $4,000
Year 2: 32% x (20,000 - 4,000) = $5,888
Year 3: 19.20% x (20,000 - 4,000 - 5,888) = $2,876.80
Year 4: 11.52% x (20,000 - 4,000 - 5,888 - 2,876.80) = $1,726.08
Year 5: 11.52% x (20,000 - 4,000 - 5,888 - 2,876.80 - 1,726.08) = $1,035.65

Total depreciation expense for computer equipment: $15,526.53

For machinery (seven-year property), we will also use MACRS Table 1, using the 200% declining balance method:

Year 1: 14.29% x $10,000 = $1,428.57
Year 2: 24.49% x (10,000 - 1,428.57) = $1,837.28
Year 3: 17.49% x (10,000 - 1,428.57 - 1,837.28) = $1,290.49
Year 4: 12.49% x (10,000 - 1,428.57 - 1,837.28 - 1,290.49) = $920.58
Year 5: 8.93% x (10,000 - 1,428.57 - 1,837.28 - 1,290.49 - 920.58) = $579.87
Year 6: 8.92% x (10,000 - 1,428.57 - 1,837.28 - 1,290.49 - 920.58 - 579.87) = $493.37
Year 7: 8.93% x (10,000 - 1,428.57 - 1,837.28 - 1,290.49 - 920.58 - 579.87 - 493.37) = $347.13

Total depreciation expense for machinery: $7,734.39

Therefore, the maximum depreciation expense for the two assets combined would be $15,526.53 + $7,734.39 = $23,260.92, which rounded to the nearest whole number is $5,429. Option C is the correct answer.

Suvi, IncPurchased Two Assets During the Current Year (A Full 12-Month