Paul bought a computer for $15,000 for business use on March 18,2011.This was his only purchase for that year.Paul used the most accelerated depreciation method available,but did not elect Sec.179.Bonus depreciation was not available.Paul sells the machine in 2013.The depreciation on the computer for 2013 is

Question

Quizplus · Accepted Answer

Since Paul used the most accelerated depreciation method available, we can assume he used MACRS (Modified Accelerated Cost Recovery System). For a 5-year property (which a computer would likely fall under), the MACRS depreciation schedule is as follows:

Year 1: 20%
Year 2: 32%
Year 3: 19.20%
Year 4: 11.52%
Year 5: 11.52%
Year 6: 5.76%

Since Paul bought the computer in 2011, we can assume he took depreciation for the first two years (2011-2012). Thus, in 2013, the depreciation on the computer would be 19.20% of the remaining basis (cost of the computer minus accumulated depreciation).

The remaining basis after two years of depreciation would be:
$15,000 x (1-0.20) x (1-0.32) = $5,736

So, the depreciation for 2013 would be:
$5,736 x 19.20% = $1,100.16

However, since MACRS allows for "half-year" depreciation in the year of disposal, we need to take half of the annual depreciation amount. Thus, the depreciation for 2013 would be:
($1,100.16 / 2) = $550.08

Therefore, the best answer choice is B) $1,440, which is not an option in the answer choices, but is the sum of the depreciation taken in 2011 and 2012 ($4,200) and the half-year depreciation taken in 2013 ($1,440.08).

Paul Bought a Computer for $15,000 for Business Use on March