Problem 8-8 Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.3, 8.4, 8.5)

During 2018, William purchases the following capital assets for use in his catering business:

New passenger automobile (September 30)	$51,500
Baking equipment (June 30)	6,500

Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation.

Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.

Calculate William's maximum depreciation deduction for 2018, assuming he uses the automobile 100 percent in his business. $___________________

Problem 8-8 (Algorithmic) Modified Accelerated Cost Recovery System (MACRS), Election to Expense, Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.3, 8.4, 8.5)

During 2018, William purchases the following capital assets for use in his catering business:

New passenger automobile (September 30)	$54,100
Baking equipment (June 30)	16,230

Assume that William decides to use the election to expense on the baking equipment (and has adequate taxable income to cover the deduction) but not on the automobile (which has a 5-year recovery period), and he also uses the MACRS accelerated method to calculate depreciation but elects out of bonus depreciation. Assume he has adequate taxable income.

Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.

Calculate William's maximum depreciation deduction for 2018, assuming he uses the automobile 100 percent in his business. $______________________

Problem 8-10 Modified Accelerated Cost Recovery System (MACRS), Listed Property, Limitation on Depreciation of Luxury Automobiles (LO 8.2, 8.4, 8.5)

On September 14, 2018, Jay purchased a passenger automobile that is used 75 percent in his accounting business. The automobile has a basis for depreciation purposes of $43,000, and Jay uses the accelerated method under MACRS. Jay does not elect to expense under section 179.

Click here to access the depreciation table and click here to access the annual automobile depreciation limitations.

Calculate Jay's depreciation deduction for 2018 assuming bonus depreciation. $______________