Suvi, Inc. purchased two assets during the current year (a full 12-month tax year). Suvi placed in service computer equipment (5-year property) on August 10 with a basis of $20,000 and machinery (7-year property) on November 18 with a basis of $10,000. Calculate the maximum depreciation expense, rounded to a whole number (ignoring §179 and bonus depreciation):
A) $857
B) $3,357
C) $5,429
D)$6,000
E)None of these

Question

Quizplus · Accepted Answer

To calculate the maximum depreciation expense, we need to use the MACRS depreciation method. For 5-year property, the MACRS depreciation percentage for the first year is 20%, and for 7-year property, it is 14.29%.

For the computer equipment with a basis of $20,000, the maximum depreciation expense is:

($20,000 x 20%) = $4,000

For the machinery with a basis of $10,000, the maximum depreciation expense is:

($10,000 x 14.29%) = $1,429

Adding these two amounts gives us a total maximum depreciation expense of:

$4,000 + $1,429 = $5,429

Therefore, the correct answer is choice C.

Suvi, Inc Purchased Two Assets During the Current Year (A Full