On November 18 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,500,500; $363,000 was allocated to the basis of the land and the remaining $1,137,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?What would be the year 3 depreciation deduction if the building was sold on January 22 of year 3?Assume the building was purchased and placed in service on October 13 instead of November 18. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?Assume the building is residential property. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?What would be the depreciation for 2022, 2023, and 2024 if the property were nonresidential property purchased and placed in service November 18, 2005 (assume the same original basis)?

Note: As per our guidelines, only the first three subparts shall be answered.A convention of federal income tax that helps companies plan the decrease in value of business assets over a set period is known as Modified Accelerated Cost Recovery System (MARCS) depreciation. MARCS enables businesses to calculate depreciation expense as the percentage of assets the business can write off throughout its useful life.1.The depreciation deduction on the building will be calculated as a percentage of $1,137,500.Year Depreciation Expense CalculationActual depreciation1$3,651(0.321% x $1,137,500)$3,651.3752$29,166(2.564% x $1,137,500)$29,165.53$29,166(2.564% x $1,137,500)$29,165.52.The depreciation for year 3 which is sold on January 22 will be calculated for 0.5 months.Year 3 depreciation expense = 0.5/12 x 29165.5= $1,215.229= $1,2153.The calculation was made for October 13 instead of November 18.YearDepreciation ExpenseCalculationActual Depreciation1$6,086(0.535% x $1,137,500)$6085.6252$29,166(2.564% x $1,137,500)$29,165.53$29,166(2.564% x $1,137,500)$29,165.51.Year Depreciation Expense 1$3,6512$29,1663$29,1662.$1,2153.YearDepreciation Expense1$6,0862$29,1663$29,166

Answered: On November 18 of year 1, Javier…

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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On November 18 of year 1, Javier purchased a building, including the land it was on, to assemble his new equipment. The total cost of the purchase was $1,500,500; $363,000 was allocated to the basis of the land and the remaining $1,137,500 was allocated to the basis of the building. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

Note: Do not round intermediate calculations. Round your answers to the nearest whole dollar amount.

Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?
What would be the year 3 depreciation deduction if the building was sold on January 22 of year 3?
Assume the building was purchased and placed in service on October 13 instead of November 18. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?
Assume the building is residential property. Using MACRS, what is Javier's depreciation deduction on the building for years 1 through 3?
What would be the depreciation for 2022, 2023, and 2024 if the property were nonresidential property purchased and placed in service November 18, 2005 (assume the same original basis)?

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