Denver Inc purchased a 5 year asset in November for $20,000.
This is the only asset...
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Accounting
Denver Inc purchased a 5 year asset in November for $20,000.This is the only asset the company placed in service during thatyear. Neither the straight line method nor the 150% decliningbalance method was elected. The company elects out of bonusdepreciation an the Section 179 expense deduction. Denver Inc soldthe asset in September of Year 3. What is the depreciation in theyear of sale? A. $2,350, B. $2,850, C. $3,250, D. $3,450
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4.4 Ratings (900 Votes)
Answer is B $2850
calculation explained below
TABLE A-5 FOR 3 YEARS CLASS PROPERTY MID QUARTER
Convention—Declining Balance is used
PLACE IN
SERVICE IN LAST QUARTER
YEAR
ASSET VALUE
RATE OF DEPRECIATION AS PER TABLE A-15
AMOUNT OF DEPRECIATION
1
$
20,000
5
$
1,000
2
$
20,000
38
$
7,600
3
$
20,000
22.8
$
2,850
NOTE:
DEPRECATION FOR THE YEAR OF SALE IS ADJUSTED TO 62.5% OF
TOTAL DEPRECIATION
ADJUSTMENT FACTOR = (NO. OF QUARTER IN YEAR OF SALE
INCLUDING QUARTER OF SALE-.5)/4
,=(3-.5)/4
0.625
OR 62.5%
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