On June 1,2017,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 2017,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

Since the automobile is 5-year recovery property and Cork Oak Corporation uses MACRS, it will be depreciated using the following percentages: 20% in Year 1, 32% in Year 2, 19.20% in Year 3, 11.52% in Year 4, and 11.52% in Year 5.

Therefore, the depreciation expense for 2017 will be calculated as follows: 
$22,000 x 20% = $4,400 x 5/12 = $1,833.33

Note that we only take 5/12 of the Year 1 depreciation expense since the automobile was placed in service on June 1, 2017.

Thus, the correct answer is B) $3,160.

On June 1,2017,Cork Oak Corporation Purchased a Passenger Automobile for 100