tions displayed below.) DLW Corporation acquired and placed in service the follo

Question

tions displayed below.) DLW Corporation acquired and placed in service the following assets during the year: Cost Basis Date Asset Acquired Computer equipment Furniture 2/28 $ 18,800 26,600 2/9 10/10 Commercial building 348,000 Assuming DLW does not elect 5179 expensing or bonus depreciation, answer the following questions: (Use MACRS Table 1 Table 2, Table 3, Table 4 and Table 5.) (Do not round intermediate calculations. Round your final answers to the nearest whole dollar amount.) b. What is DLW's year 3 cost recovery for each asset if DLW sells all of these assets on 4/20 of year 3? Answer is complete but not entirely correct ear Cost Recove Asset Computer equipment Furniture Commercial building Total 1.805 2,326 4,461 8,592

Explanation / Answer

Note: Apply mid-month convention for the building. Because the building was sold on April 20, we consider it to be used for one-half of April which is 50% x (4/12) = 16.67%

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Asset Original Basis Recovery Period Rate Portion of year Depreciation Expense Computer Equipment $18,800 5 years 19.2% 50% $1,805 Furniture $26,600 7 years 17.49% 50% $2,326 Building $348,000 39 years 2.564% 16.67% $1,487 Total $5,618

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