Problem 1. MACRS Depreciation. Select a business you would like to start (or if you have no interest in ever starting a business, just pick a business you might be interested in working for some day) and, using the internet and the tables in your packet, answer the following questions: (0) Please identify and list 8 assets (not including any real property or intellectual property) that you would need in order to successfully run this business and identify the cost of each asset using the internet. 1. 2. 3. 4. Asset _Oven Cookers and Mixers _Computer Furniture Television set Buffet serving set Dish washer _Refrigerators Cost 400 _1,000 1,000 _6,000 500 900 400 _1,200 5. 6. 7. 8. (ii) Identify three assets from the list above, which you will assume were acquired in 2018 based on the "in service" dates below. You must select at least one from the 7 year asset class (which applies to most equipment) and one from the 5 year asset class (which applies to computer hardware). Increase the quantity of these assets so that the total cost of the three assets exceeds $1M. In addition, assume you own a building that houses your company headquarters that cost $600,000 ($500K for the building and $100K for the land). List the assets, quantity, and total cost of all assets below: Asset Quantity Total Cost Date in Service 1. _ Furniture $600,000 1/1/2018 2. Refrigerators _100 _$120,000 7/1/2018 3. Computer _300 $300,000 10/15/2018 4. Building $600,000 11/1/2018 _100 Calculate the total MACRS depreciation on the four assets (disregarding bonus depreciation and any 179 deductions) by determining the depreciable basis for each asset, the applicable convention (mid- quarter, mid-year, mid-month) for the asset, determining the asset class/recovery period, and then running the individual calculations using the depreciation tables in your packet. Show all your calculations below. IV. Depreciation Calculation Select Tables Table A-1 3.5., 7., 10., 15-, and 20-Year Property Table A-3 3-, 5-, 7., 10-, 15-, and 20-Year Property Mid-Quarter rice in Second Quarter econd quarter recovery period Year UN BB ON == UN 1.78 4.26 ET8sg =HUB Table A-2 3-, 5-, 7., 10-, 15-, and 20-Year Property Placed in service in First Quarter preciation rate for recov 3-year 10-year 15-year 20-year 58.38 Year Table A-4 3-,5-, 7, 10, 15-, and 20-Year Property Mid-Canteriore in third Quarter Depreciation rate for recovery perio 3-year 5-year 10-year 15-year Year WN bn OU so E30 8 % 29 080 , UN 1224 Un anon 98988 7.06 1.82 br ssen22b E attained from IRS Publication 946 Packet (Part 1): Tables & Figures for Tax Calculations Packet (Part 1): Tables & Figures for Tax Calculations 150% Declining Balance Method Property Placed in Service in First Quarter 66.57 7.58 25.2.5 Table A-5 em 3-, 5-, 7., 10., 15-, and 20-Year Property Mid-Quarter Conventionth Quarter Placed in samoin rate for recovery 3-year s-year your over Syear 7-year 10-year SR ERR Year UN- E 890 288 Table A-16 150% Declining Balance Method de to placed in Service in Second Quarter Recovery periods iny 66.5 Your 15 8 86 2 6 0 0 - 0 NAREN b Table A Table A-13. Straight Line 150% Declining Balance Method Property Placed in Service in Third Quarter riods in years 657 7.5 8 8.5 nth Convention rear 2.5 Month property placed in service ES SAN 10 11 - | 8899 ow::: 389 288839 8889952 5999 1.16 Table A-14. 150% Declining Balance Method Half-Year Convention Recovery periods hods in years 2.5 3 3.5 4 5 6 6.5 7 7.58 Year 8.5 9 Table A-18 88| 88888 % 68= R ogs 888 150% Declining Balance Method Pidorty Placed in Service in Fourth Quarter covery periode in years 6 6.5 7 7.5 8.50 8.5 Ver 14.06 13.00 12.25 8888 88398 88 & OOO Pepp 9.65 9.65 4.82 - BR Sad Problem 1. MACRS Depreciation. Select a business you would like to start (or if you have no interest in ever starting a business, just pick a business you might be interested in working for some day) and, using the internet and the tables in your packet, answer the following questions: (0) Please identify and list 8 assets (not including any real property or intellectual property) that you would need in order to successfully run this business and identify the cost of each asset using the internet. 1. 2. 3. 4. Asset _Oven Cookers and Mixers _Computer Furniture Television set Buffet serving set Dish washer _Refrigerators Cost 400 _1,000 1,000 _6,000 500 900 400 _1,200 5. 6. 7. 8. (ii) Identify three assets from the list above, which you will assume were acquired in 2018 based on the "in service" dates below. You must select at least one from the 7 year asset class (which applies to most equipment) and one from the 5 year asset class (which applies to computer hardware). Increase the quantity of these assets so that the total cost of the three assets exceeds $1M. In addition, assume you own a building that houses your company headquarters that cost $600,000 ($500K for the building and $100K for the land). List the assets, quantity, and total cost of all assets below: Asset Quantity Total Cost Date in Service 1. _ Furniture $600,000 1/1/2018 2. Refrigerators _100 _$120,000 7/1/2018 3. Computer _300 $300,000 10/15/2018 4. Building $600,000 11/1/2018 _100 Calculate the total MACRS depreciation on the four assets (disregarding bonus depreciation and any 179 deductions) by determining the depreciable basis for each asset, the applicable convention (mid- quarter, mid-year, mid-month) for the asset, determining the asset class/recovery period, and then running the individual calculations using the depreciation tables in your packet. Show all your calculations below. IV. Depreciation Calculation Select Tables Table A-1 3.5., 7., 10., 15-, and 20-Year Property Table A-3 3-, 5-, 7., 10-, 15-, and 20-Year Property Mid-Quarter rice in Second Quarter econd quarter recovery period Year UN BB ON == UN 1.78 4.26 ET8sg =HUB Table A-2 3-, 5-, 7., 10-, 15-, and 20-Year Property Placed in service in First Quarter preciation rate for recov 3-year 10-year 15-year 20-year 58.38 Year Table A-4 3-,5-, 7, 10, 15-, and 20-Year Property Mid-Canteriore in third Quarter Depreciation rate for recovery perio 3-year 5-year 10-year 15-year Year WN bn OU so E30 8 % 29 080 , UN 1224 Un anon 98988 7.06 1.82 br ssen22b E attained from IRS Publication 946 Packet (Part 1): Tables & Figures for Tax Calculations Packet (Part 1): Tables & Figures for Tax Calculations 150% Declining Balance Method Property Placed in Service in First Quarter 66.57 7.58 25.2.5 Table A-5 em 3-, 5-, 7., 10., 15-, and 20-Year Property Mid-Quarter Conventionth Quarter Placed in samoin rate for recovery 3-year s-year your over Syear 7-year 10-year SR ERR Year UN- E 890 288 Table A-16 150% Declining Balance Method de to placed in Service in Second Quarter Recovery periods iny 66.5 Your 15 8 86 2 6 0 0 - 0 NAREN b Table A Table A-13. Straight Line 150% Declining Balance Method Property Placed in Service in Third Quarter riods in years 657 7.5 8 8.5 nth Convention rear 2.5 Month property placed in service ES SAN 10 11 - | 8899 ow::: 389 288839 8889952 5999 1.16 Table A-14. 150% Declining Balance Method Half-Year Convention Recovery periods hods in years 2.5 3 3.5 4 5 6 6.5 7 7.58 Year 8.5 9 Table A-18 88| 88888 % 68= R ogs 888 150% Declining Balance Method Pidorty Placed in Service in Fourth Quarter covery periode in years 6 6.5 7 7.5 8.50 8.5 Ver 14.06 13.00 12.25 8888 88398 88 & OOO Pepp 9.65 9.65 4.82 - BR Sad