On March 23,2017,Saturn Investments Corporation purchases a $5,000 computer (5-year property)for business-use.On November 27,2017,it pays $4,000 for new office furniture (7-year property).It does not wish to use the Section 179 election to expense.How much depreciation may Saturn deduct on the computer for 2017?

Question

Quizplus · Accepted Answer

Saturn Investments Corporation cannot use the Section 179 election. Therefore, the computer is depreciated over 5 years using the MACRS depreciation system. According to MACRS, 20% of the cost of the computer can be deducted in the first year of use. Thus, Saturn Investments Corporation can deduct $1,000 ($5,000 x 20%) for the computer in 2017. The office furniture is also depreciated over 7 years using MACRS, but since it was purchased in November, only 2/12 (or 1/6) of the yearly depreciation can be claimed in 2017, which is $333.33 ($4,000 x 1/6). Therefore, the total depreciation deduction for 2017 is $1,000 + $333.33 = $1,333.33, which is closest to answer choice B ($1,750).

On March 23,2017,Saturn Investments Corporation Purchases a $5,000 Computer (5-Year