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11 June, 18:56

Weston acquires a new office machine (7-year class asset) on August 2, 2017, for $75,000. This is the only asset Weston acquired during the year. He does not elect immediate expensing under § 179. He claims the maximum additional first-year depreciation deduction. On September 15, 2018, Weston sells the machine. Determine Weston's cost recovery for 2017. Determine Weston's cost recovery for 2018.

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  1. 11 June, 21:05
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    The total cost recovery for 2017 is $38,838.75 and The total recovery cost for 2018 is $6457.031

    Explanation:

    for 2017:

    additional first year depreciation = $75,000*50%

    = $37,500

    using 7-year MACRS mid quater converntion, the depreciation % for quater 4 is 3.57%

    additional MACRS cost recovery = ($75,000 - $37,500) * 3.57%

    = $1338.75

    total cost recovery for 2017 = $37,500 + $1338.75

    = $38,838.75

    for 2018, additional first year depreciation is $37,500

    using 7-year MACRS mid quarter convention for next year, the depreciation % fpr quarter 4 is 27.55%

    the machine sold in september, so it was used for two full quarters and half third quater

    the recovery is computed for 2.5 over 4 quarters of a year

    additional MARSC cost recovery = $37,500*27.55% * (2.5/4)

    = $6457.031

    total recovery cost for 2018 is $6457.031

    Therefore, The total cost recovery for 2017 is $38,838.75 and The total recovery cost for 2018 is $6457.031
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