Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn’t want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.a. The vehicle cost $34,000, and business use is 100 percent (ignore §179 expense). Calculate for 2021 & 2022b. The vehicle cost $90,000, and business use is 100 percent. Calculate for 2021 & 2022c. The vehicle cost $90,000, and she used it 80 percent for business. Calculate for 2021 and 2022. D. The vehicle cost $90,000, and she used it 80 percent for business. She sold it on March 1 of year 2. Calculate for 2021 & 2022. E. The vehicle cost $90,000, and she used it 20 percent for business. Calculate for 2021 & 2022. F. f. The vehicle cost $90,000, and it is an SUV that weighs 6,500 pounds. Business use was 100 percent. Calculate for 2021 & 2022 ### Depreciation Tables Using MACRS Mid-Quarter ConventionThe Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used for tax purposes in the United States. Below are tables that illustrate the depreciation rates applied to property using the mid-quarter convention. This convention is required when more than 40% of the value of property is placed into service in the last quarter of the tax year.#### Table 2a: MACRS Mid-Quarter Convention for Property Placed in Service During the First QuarterThis table provides the depreciation rates for property placed in service during the first quarter with varying recovery periods.| Year | 5-Year | 7-Year ||-------|--------|--------|| Year 1| 35.00% | 25.00% || Year 2| 26.00% | 21.43% || Year 3| 15.60% | 15.31% || Year 4| 11.01% | 10.93% || Year 5| 11.01% | 8.75% || Year 6| 1.38% | 8.74% || Year 7| | 8.75% || Year 8| | 1.09% |#### Table 2b: MACRS Mid-Quarter Convention for Property Placed in Service During the Second QuarterThis table outlines the depreciation rates for property placed in service during the second quarter.| Year | 5-Year | 7-Year ||-------|--------|--------|| Year 1| 25.00% | 17.85% || Year 2| 30.00% | 23.47% || Year 3| 18.00% | 16.76% || Year 4| 11.37% | 11.97% || Year 5| 11.37% | 8.87% || Year 6| 4.26% | 8.87% || Year 7| | 8.87% || Year 8| | 3.34% |#### Table 2c: MACRS Mid-Quarter Convention for Property Placed in Service During the Third QuarterThis table shows the depreciation rates for property **Table 1: MACRS Half-Year Convention**This table displays the Depreciation Rates according to the Modified Accelerated Cost Recovery System (MACRS) for various recovery periods. The recovery periods are categorized into five classes: 3-Year, 5-Year, 7-Year, 10-Year, 15-Year, and 20-Year.| Year | 3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year ||--------|--------|--------|--------|---------|---------|---------|| Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% || Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 || Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 || Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 || Year 5 | | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 || Year 6 | | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 || Year 7 | | 8.93 | 6.55 | 5.90 | 4.888 | || Year 8 | | 4.46 | 6.55 | 5.90 | 4.522 | || Year 9 | | | 6.56 | 5.91 | 4.462 | || Year 10| | | 6.55 | 5.90 | 4.461 | || Year 11| | | 3.28 | 5.91 |

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including §179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn’t want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.

a. The vehicle cost $34,000, and business use is 100 percent (ignore §179 expense). Calculate for 2021 & 2022

b. The vehicle cost $90,000, and business use is 100 percent. Calculate for 2021 & 2022

c. The vehicle cost $90,000, and she used it 80 percent for business. Calculate for 2021 and 2022.

D. The vehicle cost $90,000, and she used it 80 percent for business. She sold it on March 1 of year 2. Calculate for 2021 & 2022.

E. The vehicle cost $90,000, and she used it 20 percent for business. Calculate for 2021 & 2022.

F. f. The vehicle cost $90,000, and it is an SUV that weighs 6,500 pounds. Business use was 100 percent. Calculate for 2021 & 2022

### Depreciation Tables Using MACRS Mid-Quarter Convention

The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used for tax purposes in the United States. Below are tables that illustrate the depreciation rates applied to property using the mid-quarter convention. This convention is required when more than 40% of the value of property is placed into service in the last quarter of the tax year.

#### Table 2a: MACRS Mid-Quarter Convention for Property Placed in Service During the First Quarter

This table provides the depreciation rates for property placed in service during the first quarter with varying recovery periods.

| Year | 5-Year | 7-Year |
|-------|--------|--------|
| Year 1| 35.00% | 25.00% |
| Year 2| 26.00% | 21.43% |
| Year 3| 15.60% | 15.31% |
| Year 4| 11.01% | 10.93% |
| Year 5| 11.01% | 8.75% |
| Year 6| 1.38% | 8.74% |
| Year 7| | 8.75% |
| Year 8| | 1.09% |

#### Table 2b: MACRS Mid-Quarter Convention for Property Placed in Service During the Second Quarter

This table outlines the depreciation rates for property placed in service during the second quarter.

| Year | 5-Year | 7-Year |
|-------|--------|--------|
| Year 1| 25.00% | 17.85% |
| Year 2| 30.00% | 23.47% |
| Year 3| 18.00% | 16.76% |
| Year 4| 11.37% | 11.97% |
| Year 5| 11.37% | 8.87% |
| Year 6| 4.26% | 8.87% |
| Year 7| | 8.87% |
| Year 8| | 3.34% |

#### Table 2c: MACRS Mid-Quarter Convention for Property Placed in Service During the Third Quarter

This table shows the depreciation rates for property

**Table 1: MACRS Half-Year Convention**

This table displays the Depreciation Rates according to the Modified Accelerated Cost Recovery System (MACRS) for various recovery periods. The recovery periods are categorized into five classes: 3-Year, 5-Year, 7-Year, 10-Year, 15-Year, and 20-Year.

| Year | 3-Year | 5-Year | 7-Year | 10-Year | 15-Year | 20-Year |
|--------|--------|--------|--------|---------|---------|---------|
| Year 1 | 33.33% | 20.00% | 14.29% | 10.00% | 5.00% | 3.750% |
| Year 2 | 44.45 | 32.00 | 24.49 | 18.00 | 9.50 | 7.219 |
| Year 3 | 14.81 | 19.20 | 17.49 | 14.40 | 8.55 | 6.677 |
| Year 4 | 7.41 | 11.52 | 12.49 | 11.52 | 7.70 | 6.177 |
| Year 5 | | 11.52 | 8.93 | 9.22 | 6.93 | 5.713 |
| Year 6 | | 5.76 | 8.92 | 7.37 | 6.23 | 5.285 |
| Year 7 | | 8.93 | 6.55 | 5.90 | 4.888 | |
| Year 8 | | 4.46 | 6.55 | 5.90 | 4.522 | |
| Year 9 | | | 6.56 | 5.91 | 4.462 | |
| Year 10| | | 6.55 | 5.90 | 4.461 | |
| Year 11| | | 3.28 | 5.91 |

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