Answered: Phil owns a ranch business and uses…

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

Phil owns a ranch business and uses four-wheelers to do much of his work. Occasionally, though, he and his boys will go for a ride together as a family activity. During year 1, Phil put 1,088 miles on the four-wheeler that he bought on January 15 for $11,900. Of the miles driven, only 243 miles were for personal use. Assume four-wheelers qualify to be depreciated according to the five-year MACRS schedule and the four-wheeler was the only asset Phil purchased this year. (Use MACRS Table 1, Table 2, Table 3, Table 4 and Table 5.)

a. Calculate the allowable depreciation for year 1 (ignore the §179 expense and bonus depreciation).

Expert Solution

Step 1

Formula used:

$\begin{array}{rcl} A l l o w a b l e d e p r e c i a t i o n f o r y e a r 1 & = & B u \sin e s s t r a v e l e x p e n s e \times D e p r e c i a t i o n r a t e a c c o r d i n g t o t h e 5 y e a r M A C R S s c h e d u l e \end{array}$

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