On June 1, 2014, Cork Oak Corporation purchased a passenger automobile for 100 percent use in its business. The auto, with a cost basis of $22,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken for 2014, assuming Cork Oak Corporation uses the accelerated depreciation method under MACRS but does not choose to make the election to expense or take bonus depreciation?

Question

Quizplus · Accepted Answer

Under MACRS for 5-year property, the first-year depreciation rate is 20%. Therefore, $22,000 x 20% = $4,400. However, due to the half-year convention, only half of this amount is taken in the first year, resulting in $2,200. But the maximum depreciation for a passenger automobile in 2014 is $3,160, so the depreciation is limited to $3,160.

On June 1, 2014, Cork Oak Corporation Purchased a Passenger