On April 1st, Leo Smith paid $310,000 for aresidential rental property. This purchase price represents $250,000 for the building and $60,000 forthe land. Five years later, on November 1st, he soldthe property for $400,000. Compute the MACRSdepreciation for each of the five calendar years during which he had the property.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
On April 1st, Leo Smith paid $310,000 for a
residential rental property. This purchase price represents $250,000 for the building and $60,000 for
the land. Five years later, on November 1st, he sold
the property for $400,000. Compute the MACRS
depreciation for each of the five calendar years during which he had the property.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 1 images
