Modified Accelerated Cost Recovery System MACRS Listed Prope

Modified Accelerated Cost Recovery System (MACRS), Listed Property (LO 7.4, 7.6)

On February 2, 2016, Alexandra purchases a personal computer for her home. The computer cost $5,960. Alexandra uses the computer 80 percent of the time in her accounting business, and the remaining 20 percent of the time for various personal uses. Calculate Alexandra\'s maximum depreciation deduction for 2016 for the computer, assuming half-year convention and she does not make the election to expense or take bonus depreciation.

Click here to access the depreciation table.

If required, round your answer to nearest dollar.

Solution

Computer is depreciated over 5 year recovery period. Rate of depreciation is 20% for a 5 year recovery period asset with half year convention.

Depreciation ordinarily = 5,960 * 20% = 1192

Since, only 80% of the asset is used for business purposes, basis of the asset for depreciation comes to = 4,768

Depreication then comes to = 4,768 * 20% = 953.60

Hence, depreciation = $954 (rounded off)