Acorn Construction (calendar-year end C-corporation) has had rapid expansion dur

Question

Acorn Construction (calendar-year end C-corporation) has had rapid expansion during the last half of the current year due to the housing market’s recovery. The company has record income and would like to maximize their cost recovery, as much as possible, for the current year. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.) (Round your answer to the nearest whole dollar amount.)

Acorn provided the following information:

a. What is Acorn’s maximum cost recovery expense in the current year?

  
Maximum Total Depreciation Expense: $__________________

Asset Placed in Service Basis New equipment and tools August 20 $ 800,000 Used light duty trucks October 17 1,500,000 Used machinery November 6 525,000 Total $ 2,825,000 ABLE 1 MACRS Half-Year Convention Depreciation Rate for Recovery Period 3-year 5-year 7-year 10-year 15-year 20-year Year 3.750 7.219 6.677 5.00 9.50 8.55 7.70 6.93 6.23 5.90 5.90 5.91 5.90 5.91 5.90 5.91 5.90 5.91 2.95 20.00 32.00 19.20 11.52 11.52 5.76 14.29 24.49 17.49 12.49 8.93 8.92 8.93 4.46 10.00 18.00 14.40 11.52 9.22 7.37 6.55 6.55 6.56 6.55 3.28 33.33 44.45 14.81 7.41 3 4. 5.713 5.285 4.888 4.522 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 4.462 4.461 2.231 6 8 9 10 12 13 15 16 17 18 19 20 21

Explanation / Answer

Maximum Total Depreciation Expense: $536583

(NOTE: Bonus depreciation can be availed only on new assets)

Asset Original Basis Bonus depreciation remaining basis MACRS rate depreciaiton expnese New Equipment and Tools (7-year) 8,00,000 400000 4,00,000 10.71% 42840 Used Light Duty Trucks(5-year) 15,00,000 15,00,000 5% 75000 Used Machinery (7-year) 5,25,000 5,25,000 3.57% 18743 bonus depreciation 400000 Total 536583

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