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Tax Accounting Chapter 10 Essay

764 words - 4 pages

Comprehensive Problems

61. Back in Boston, Steve has been busy creating and managing his new company, Teton Mountaineering (TM), which is based out of a small town in Wyoming. In the process of doing so, TM has acquired various types of assets. Below is a list of assets acquired during 2012:

Asset Cost Date Place in Service
Office furniture $10,000 02/03/2012
Machinery 560,000 07/22/2012
Used delivery truck* 15,000 08/17/2012

*Not considered a luxury automobile, thus not subject to the luxury automobile limitations

During 2012, TM had huge success (and had no §179 limitations) and Steve acquired more assets the next year to increase its production capacity. ...view middle of the document...

Complete Part I of Form 4562 for part b.


a) The 2012 depreciation deduction is $513,003.

Description | Cost | Sec. 179 Expense | MACRS Basis | Current MACRS Expense | Total Expense |
Office Furniture | 10,000 | 10,000 | - | - | 10,000 |
Machinery | 560,000 | 490,000 | 70,000 | 10,003 | 500,003 |
Used Delivery Truck | 15,000 |   | 15,000 | 3,000 | 3,000 |
  |   |   |   |   |   |
Totals | 585,000 | 500,000 | 85,000 | 13,0032 | 513,003 |

b) The 2013 depreciation deduction is $529,387.

Description | Cost | Sec. 179 Expense | MACRS Basis | Current MACRS Expense | Total Expense |
Office Equipment | 10,000 |   | - | - | - |
Machinery | 560,000 | | 70,000 | 17,143 | 17,143 |
Used Delivery Truck | 15,000 |   | 15,000 | 4,800 | 4,800 |
  |   |   |   |   |   |
Computers & Info. System | 40,000 | 25,000  | 15,000 | 3,000 | 28,000 |
Luxury Auto | 80,000 |   | 80,000 | 3,160 | 3,160 |
Assembly Equipment | 475,000 | 475,000 | - | - | 475,000 |
Storage Building | 400,000 |   | 400,000 | 1,284 | 1,284 |
  |   |   |   |   |   |
Totals | 1,580,000 | 500,000 | 580,000 | 29,387 | 529,387 |

c) The 2013 depreciation deduction is $543,387.

Description | Cost | Sec. 179 Expense | Bonus | MACRS Basis | Current MACRS Expense | Total Expense |
Office Furniture | 10,000 |   |   |   | - | - |
Machinery | 560,000 |   |   | 70,000 | 17,143 | 17,143 |
Used Delivery Truck | 15,000 |   |   | 15,000 | 4,800 | 4,800 |
  |   |   |...

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