Exam 8: Depreciation, Cost Recovery, Amortization, and Depletion

On April 5, 2018, Orange Corporation purchased, and placed in service, seven-year class assets costing $1,030,000 and five-year class assets costing $140,000. Orange elects to expense the maximum amount under § 179. Orange does not take additional first-year depreciation. Assume taxable income is not a limitation. Determine Orange Corporation's maximum cost recovery with respect to the assets for 2018.

MACRS does not use salvage value. As a result, if a 7-year MACRS asset is held for 10 years, its adjusted basis will be zero.

On June 1, 2018, Irene places in service a new automobile that cost $21,000. The car is used 70% for business and 30% for personal use. Assume this percentage is maintained for the life of the car.) She does not take additional first-year depreciation. Determine the cost recovery deduction for 2019.

The maximum cost recovery method for all personal property under MACRS is 150% declining balance.

Alice purchased office furniture on September 20, 2017, for $100,000. On October 10, 2017, she purchased business computers for $80,000. Alice placed all of the assets in service on January 15, 2018. Alice did not elect to expense any of the assets under § 179, did not elect straight-line cost recovery, and did not take additional first-year depreciation. Determine the cost recovery deduction for the business assets for 2018.