Very Big Ltd is a large business taxpayer that leases most of its assets, and only owns the following assets.   Asset A which had been purchased a few years ago had a life expectancy of 8 years and cost $1,500. Its opening adjustable value for the current year was $985.   Asset B which was bought on 1 November CY at the cost $760. It had a life expectancy of 5 years.   Asset C bought in the 1 Feb CY at a cost of $20,000. It has a life expectancy of 15 years.   Asset D bought on 1 August CY for $220,000, and the asset has an effective life of 8 years.   State ALL the answers that are CORRECT.   Group of answer choices   Very Big Ltd will be able to claim depreciation at the rate of 25% on $220,000 for 334 days for Asset D.   Very Big Ltd can allocate both Assets A and B to a Low-Value Pool and depreciate them at 37.5%.   If Very Big Ltd has created a Low Value Pool, it must not put Asset A into a Low Value Pool as it can claim depreciation at the rate of 25% for the current year instead of 18.75% if allocated to the pool.   Very Big Ltd will be able obtain a deduction of $20,000 for the current year for Asset C.

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Very Big Ltd is a large business taxpayer that leases most of its assets, and only owns the following assets.

 

Asset A which had been purchased a few years ago had a life expectancy of 8 years and cost $1,500. Its opening adjustable value for the current year was $985.

 

Asset B which was bought on 1 November CY at the cost $760. It had a life expectancy of 5 years.

 

Asset C bought in the 1 Feb CY at a cost of $20,000. It has a life expectancy of 15 years.

 

Asset D bought on 1 August CY for $220,000, and the asset has an effective life of 8 years.

 

State ALL the answers that are CORRECT.

 

Group of answer choices

 

Very Big Ltd will be able to claim depreciation at the rate of 25% on $220,000 for 334 days for Asset D.

 

Very Big Ltd can allocate both Assets A and B to a Low-Value Pool and depreciate them at 37.5%.

 

If Very Big Ltd has created a Low Value Pool, it must not put Asset A into a Low Value Pool as it can claim depreciation at the rate of 25% for the current year instead of 18.75% if allocated to the pool.

 

Very Big Ltd will be able obtain a deduction of $20,000 for the current year for Asset C.

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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