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Comprehensive Problem 10-76 (LO 10-1, LO 10-2, LO 10-3, LO 10-4, LO 10-5) (Algo)

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Karane Enterprises, a calendar-year manufacturer based in College Station, Texas, began business in 2020. In the process of setting up the business, Karane has acquired various types of assets. Below is a list of assets acquired during 2020:

Asset	Cost	Date Placed in Service
Office furniture	$ 370,000	02/03/2020
Machinery	1,604,000	07/22/2020
Used delivery truck*	84,000	08/17/2020

*Not considered a luxury automobile.

During 2020, Karane was very successful (and had no 179 limitations) and decided to acquire more assets in 2021 to increase its production capacity. These are the assets acquired during 2021:

Asset	Cost	Date Placed in Service
Computers and information system	$ 444,000	03/31/2021
Luxury auto	91,000	05/26/2021
Assembly equipment	1,420,000	08/15/2021
Storage building	800,000	11/13/2021

Used 100% for business purposes.

Karane generated taxable income in 2021 of $1,787,500 for purposes of computing the 179 expense limitation. (Use MACRS Table 1, Table 2, Table 3, Table 4, Table 5, and Exhibit 10-10.) (Leave no answer blank. Enter zero if applicable. Input all the values as positive numbers.)

a. Compute the maximum 2020 depreciation deductions, including 179 expense (ignoring bonus depreciation).

b. Compute the maximum 2021 depreciation deductions, including 179 expense (ignoring bonus depreciation).

c. Compute the maximum 2021 depreciation deductions, including 179 expense, but now assume that Karane would like to take bonus depreciation.

Required:

d. Now assume that during 2021, Karane decides to buy a competitors assets for a purchase price of $1,613,560. Compute the maximum 2021 cost recovery, including 179 expense and bonus depreciation. Karane purchased the following assets for the lump-sum purchase price: (Round your final answers to the nearest whole dollar amount.)

Asset	Cost	Date Placed in Service
Inventory	$ 264,000	09/15/2021
Office furniture	274,000	09/15/2021
Machinery	294,000	09/15/2021
Patent	237,600	09/15/2021
Goodwill	5,960	09/15/2021
Building	474,000	09/15/2021
Land	64,000	09/15/2021

Assume that Karane takes the maximum section 179 expense for the Assembly Equipment.