a) Calculate total accumulative depreciation of each asset until the sold Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset.

a) Calculate total accumulative depreciation of each asset until the sold Hint: Review Class 15 material b) Calculate the Adjusted basis for each asset c) Calculate the Gain/Loss Recognized for each asset.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

2nd note: Assume there is no Section 179 and bonus depreciation. Use MACRS only for depreciation.
Andrea owns a small company that producing facial masks. Thanks to COVID-19, her business was booming at the
beginning of 2020. But by end of 2020, since the need for facial masks is no longer there, Andrea decided to close her
business. The first step to close her business involve selling off business assets. Below are her assets transaction info
Assets
Purchased
Cost
Sold date
Sold price
Date
Delivery car 7/1/20
2/14/19
12/31/20
12/31/20
12/31/20
25k
15k
Furniture
Equipment
20k
10k
2/1/19
Warehouse 1/1/19
1/1/19
100k
20k
12/31/20
12/31/20
50k
55k
Land
150k
200k
a) Calculate total accumulative depreciation of each asset until the sold date (12/31/20).
Hint: Review Class 15 material
b) Calculate the Adjusted basis for each asset
c) Calculate the Gain/Loss Recognized for each asset.
d) Point out the exact character of gain/loss for each asset gain/loss (ex: Ordinary, pure 1231, 1245, 1250, etc.)
e) Calculate the Net 1231 Gain/Loss
Hint: Be aware of 1245 Depreciation recapture and 1231 lookback rules
f) Characterize the gain from the whole 5 transactions into 2 categories: Total Ordinary Gain & Total LTCG

Hint:
From a ->d: Create tables and fill in the answer. A table can be similar as below:
Depreciation Depreciation Acc. Total
year 1
Adjusted
Depreciation Basis
Assets
Purchased
Cost
Date
year 2
Delivery car 7/1/20
2/14/19
2/1/19
1/1/19
1/1/19
25k
Furniture
Equipment
20k
100k
Warehouse
50k
Land
150k
Assets
Sold date
Sold price
Adjusted
Gain/Loss
Characters
basis
recognized
Delivery car 12/31/20
Furniture
Equipment
Warehouse
Land
15k
12/31/20
12/31/20
12/31/20
12/31/20
10k
20k
55k
200k

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