Question 12 of 20. Johnni placed the following items in service during 2015: ) F

Question

Question 12 of 20. Johnni placed the following items in service during 2015: ) February 3-a $2.000 machine; 2) Ju desk; and 3) November 10- a $5,000 computer system. No §179 expense deduction was taken. If Johnni wants to avoid the mid-quarter convention rules, he should: O Sell the computer. ) Take a section 179 expense deduction of $2.500 on the computer. O Take bonus depreciation of $2,500 on the computer. O Not depreclate the computer Mark for follow up Question 13 of 20. Johnni placed the following items in service during 2015: 1) February 3- a $2.000 machine, 2) June 16-a $1,500 desk, and 3) November 10-a $5,000 computer system. No §179 expense deduction was taken, which depreciation convention is Johnni required to use? O Half-year. O Mid-month Mid-quarter O Straight-ine.

Explanation / Answer

Question 12:

The correct option is “Sell the Computer”

Mid-quarter convention under the MACRS system is used when the total value of tangible personal property placed in service during the last quarter of the year is more than 40% of all the property placed in service during the year. This test is applied after deducting the section 179 expense from the cost of tangible personal property and removing the property placed in service and disposed during the same year but not bonus depreciation.

The percentage of tangible personal property placed in service in the fourth quarter before section 179 expense is 58.82% and it is calculated as follows:

Particulars

Quarter

Year Total

I to III

IV

Machine

$2,000

$2,000

Desk

$1,500

$1,500

Computer

$5,000

$5,000

Total

$3,500

$5,000

$8,500

Percentage

41.18%

58.82%

100.00%

The percentage of tangible personal property placed in service in the fourth quarter after section 179 expense of $2,500 is 41.67% and it is calculated as follows:

Particulars

Quarter

Year Total

I to III

IV

Machine

$2,000

$2,000

Desk

$1,500

$1,500

Computer

$2,500

$2,500

Total

$3,500

$2,500

$6,000

Percentage

58.33%

41.67%

100.00%

The percentage of tangible personal property placed in service and sold in the fourth quarter is 0% and it is calculated as follows:

Particulars

Quarter

Year Total

I to III

IV

Machine

$2,000

$2,000

Desk

$1,500

$1,500

Computer

$0

$0

Total

$3,500

$0

$3,500

Percentage

100%

0%

100.00%

--------------------------------------------------------------------------------------------------------------------------------

Question 13:

The correct option is “mid-quarter”

Mid-quarter convention is used as the percentage of tangible personal property placed in service during the fourth quarter of the year is 58.82% and it is more than 40% of total tangible personal property placed in service during the year.  

------------------------------------------------------------------------------------------------------------------------------------------------------

Question 15:

The correct option is “$500”

As most of the depreciable personal property is classified as 7-year property under MACRS, the depreciation deduction for the machine is calculated using the mid-quarter convention rate of 25% for the property placed in service in first quarter as follows:

Particulars

Amount

Cost of machine (February 3)

$2,000

×     Rate

25%

Depreciation deduction

$500

Particulars

Quarter

Year Total

I to III

IV

Machine

$2,000

$2,000

Desk

$1,500

$1,500

Computer

$5,000

$5,000

Total

$3,500

$5,000

$8,500

Percentage

41.18%

58.82%

100.00%

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.