Billie Bob purchased a used computer (5-year property)for use in his sole proprietorship in the prior year.The basis of the computer was $2,400.Billie Bob used the computer in his business 60 percent of the time during the first year.During the second year,Billie Bob used the computer 40 percent for business use.Calculate Billie Bob's depreciation expense during the second year assuming the sole proprietorship had a loss during the year (Billie Bob did not place the asset in service in the last quarter).(Use MACRS Table 1)
A) $0.
B) $48.
C) $192.
D) $336.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

In the second year, the business use percentage is 40%. Under MACRS for 5-year property, the second-year depreciation rate is 32%. The calculation is: $2,400 x 32% x 40% = $307.20. However, since the business use is less than 50%, the computer is subject to the mid-quarter convention and must be depreciated using the straight-line method over the remaining life. The correct depreciation is $2,400 x 20% (straight-line rate for 5-year property) x 40% = $192.

Billie Bob Purchased a Used Computer (5-Year Property)for Use in His