On March 23, 2018, Saturn Investments Corporation purchases a $5,000 computer (5-year property) for business-use. On November 27, 2018, it pays $4,000 for new office furniture (7-year property). It does not wish to use the Section 179 election to expense and elects not to take bonus depreciation. How much depreciation may Saturn deduct on the computer for 2018?

Question

Quizplus · Accepted Answer

For the computer, since it is a 5-year property, the MACRS depreciation table for the half-year convention should be used. Based on this table, the depreciation for year 1 is 20% of the cost of the asset. Therefore, the depreciation deduction for the computer for 2018 is $5,000 x 20% = $1,000.

For the office furniture, since it is a 7-year property, the MACRS depreciation table for the half-year convention should be used. Based on this table, the depreciation for year 1 is 14.29% of the cost of the asset. Therefore, the depreciation deduction for the office furniture for 2018 is $4,000 x 14.29% = $571.

The total depreciation deduction for 2018 is $1,000 + $571 = $1,571. However, since the question asks only for depreciation deduction for the computer, the correct answer is (B) $1,000.

On March 23, 2018, Saturn Investments Corporation Purchases a $5,000