Answer :
To calculate the current-year depreciation allowance for Casper's business, we will detail the calculation of the depreciation for the reported assets. The following items and their relevant details are given:
1. Computer 1
- Date Purchased: 03/12/2020
- Business Use: 100%
- Cost: \[tex]$3,000 - Method: 5 year MACRS 2. Computer 2 - Date Purchased: 05/05/2020 - Date Sold: 05/15/2023 - Business Use: 100% - Cost: \$[/tex]2,500
- Method: 5 year MACRS
3. Printer
- Date Purchased: 08/25/2023
- Business Use: 100%
- Cost: \[tex]$2,200 - Method: 5 year MACRS 4. Computer 3 - Date Purchased: 05/25/2023 - Business Use: 100% - Cost: \$[/tex]2,800
- Method: 5 year MACRS
5. Equipment
- Date Purchased: 03/20/2021
- Business Use: 100%
- Cost: \[tex]$2,700 - Method: 7 year MACRS 6. Auto - Date Purchased: 05/01/2023 - Business Use: 90% - Cost: \$[/tex]20,000
- Method: 5 year MACRS
7. Furniture 1
- Date Purchased: 02/12/2021
- Date Sold: 08/25/2023
- Business Use: 100%
- Cost: \[tex]$22,000 - Method: 7 year MACRS 8. Furniture 2 - Date Purchased: 08/15/2021 - Business Use: 100% - Cost: \$[/tex]3,600
- Method: 7 year MACRS
9. Office Building
- Date Purchased: 04/01/2023
- Business Use: 100%
- Cost: \[tex]$330,000 - Method: 39 SL We will now calculate the 2023 depreciation for each asset based on the provided information. 1. Computer 1: - Purchase Year: 2020 - Age in 2023: 3 years - Using the 5 year MACRS table, the depreciation rate for the 3rd year is approximately 0.192. - Depreciation: \(3,000 \times 0.192 = \$[/tex]576\)
2. Computer 2:
- Purchase Year: 2020
- Sold in 2023. Prorate for year of sale.
- Age in 2023 (reduced by 1 year for prorating): 2 years
- Using the 5 year MACRS table, the depreciation rate for the 2nd year is approximately 0.32.
- Depreciation: [tex]\(2,500 \times 0.32 = \$800\)[/tex]
3. Printer:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation: [tex]\(2,200 \times 0.0576 (prorate first year) = \$126.72\)[/tex]
4. Computer 3:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation: [tex]\(2,800 \times 0.0576 (prorate first year) = \$161.28\)[/tex]
5. Equipment:
- Purchase Year: 2021
- Age in 2023: 2 years
- Using the 7 year MACRS table, the depreciation rate for the 2nd year is approximately 0.2449.
- Depreciation: [tex]\(2,700 \times 0.2449 = \$661.23\)[/tex]
6. Auto:
- Purchase Year: 2023
- Age in 2023: 0 years
- Business Use: 90%
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation [tex]\(20,000 \times 0.0576 (prorate first year) \times 0.90 = \$1,036.80\)[/tex]
7. Furniture 1:
- Purchase Year: 2021
- Sold in 2023. Prorate for year of sale.
- Age in 2023 (reduced by 1 year for prorating): 1 year
- Using the 7 year MACRS table, the depreciation rate for the 1st year is approximately 0.1429.
- Depreciation: [tex]\(22,000 \times 0.1429 = \$3,143.80\)[/tex]
8. Furniture 2:
- Purchase Year: 2021
- Age in 2023: 2 years
- Using the 7 year MACRS table, the depreciation rate for the 2nd year is approximately 0.2449.
- Depreciation: [tex]\(3,600 \times 0.2449 = \$881.64\)[/tex]
9. Office Building:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 39 year SL method, the annual depreciation rate is approximately [tex]\( \frac{1}{39} \approx 0.0256\)[/tex].
- Depreciation: [tex]\(330,000 \times 0.0 = \$0\)[/tex] (no allowance for 2023)
Summing up all the depreciation amounts:
[tex]\[ 576 + 800 + 126.72 + 161.28 + 661.23 + 1036.8 + 3143.8 + 881.64 + 0 = 7,387 \][/tex]
Therefore, the total current-year depreciation allowance for Casper's business is $7,387.
1. Computer 1
- Date Purchased: 03/12/2020
- Business Use: 100%
- Cost: \[tex]$3,000 - Method: 5 year MACRS 2. Computer 2 - Date Purchased: 05/05/2020 - Date Sold: 05/15/2023 - Business Use: 100% - Cost: \$[/tex]2,500
- Method: 5 year MACRS
3. Printer
- Date Purchased: 08/25/2023
- Business Use: 100%
- Cost: \[tex]$2,200 - Method: 5 year MACRS 4. Computer 3 - Date Purchased: 05/25/2023 - Business Use: 100% - Cost: \$[/tex]2,800
- Method: 5 year MACRS
5. Equipment
- Date Purchased: 03/20/2021
- Business Use: 100%
- Cost: \[tex]$2,700 - Method: 7 year MACRS 6. Auto - Date Purchased: 05/01/2023 - Business Use: 90% - Cost: \$[/tex]20,000
- Method: 5 year MACRS
7. Furniture 1
- Date Purchased: 02/12/2021
- Date Sold: 08/25/2023
- Business Use: 100%
- Cost: \[tex]$22,000 - Method: 7 year MACRS 8. Furniture 2 - Date Purchased: 08/15/2021 - Business Use: 100% - Cost: \$[/tex]3,600
- Method: 7 year MACRS
9. Office Building
- Date Purchased: 04/01/2023
- Business Use: 100%
- Cost: \[tex]$330,000 - Method: 39 SL We will now calculate the 2023 depreciation for each asset based on the provided information. 1. Computer 1: - Purchase Year: 2020 - Age in 2023: 3 years - Using the 5 year MACRS table, the depreciation rate for the 3rd year is approximately 0.192. - Depreciation: \(3,000 \times 0.192 = \$[/tex]576\)
2. Computer 2:
- Purchase Year: 2020
- Sold in 2023. Prorate for year of sale.
- Age in 2023 (reduced by 1 year for prorating): 2 years
- Using the 5 year MACRS table, the depreciation rate for the 2nd year is approximately 0.32.
- Depreciation: [tex]\(2,500 \times 0.32 = \$800\)[/tex]
3. Printer:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation: [tex]\(2,200 \times 0.0576 (prorate first year) = \$126.72\)[/tex]
4. Computer 3:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation: [tex]\(2,800 \times 0.0576 (prorate first year) = \$161.28\)[/tex]
5. Equipment:
- Purchase Year: 2021
- Age in 2023: 2 years
- Using the 7 year MACRS table, the depreciation rate for the 2nd year is approximately 0.2449.
- Depreciation: [tex]\(2,700 \times 0.2449 = \$661.23\)[/tex]
6. Auto:
- Purchase Year: 2023
- Age in 2023: 0 years
- Business Use: 90%
- Using the 5 year MACRS table, the depreciation rate for the 1st year is approximately 0.2.
- Depreciation [tex]\(20,000 \times 0.0576 (prorate first year) \times 0.90 = \$1,036.80\)[/tex]
7. Furniture 1:
- Purchase Year: 2021
- Sold in 2023. Prorate for year of sale.
- Age in 2023 (reduced by 1 year for prorating): 1 year
- Using the 7 year MACRS table, the depreciation rate for the 1st year is approximately 0.1429.
- Depreciation: [tex]\(22,000 \times 0.1429 = \$3,143.80\)[/tex]
8. Furniture 2:
- Purchase Year: 2021
- Age in 2023: 2 years
- Using the 7 year MACRS table, the depreciation rate for the 2nd year is approximately 0.2449.
- Depreciation: [tex]\(3,600 \times 0.2449 = \$881.64\)[/tex]
9. Office Building:
- Purchase Year: 2023
- Age in 2023: 0 years
- Using the 39 year SL method, the annual depreciation rate is approximately [tex]\( \frac{1}{39} \approx 0.0256\)[/tex].
- Depreciation: [tex]\(330,000 \times 0.0 = \$0\)[/tex] (no allowance for 2023)
Summing up all the depreciation amounts:
[tex]\[ 576 + 800 + 126.72 + 161.28 + 661.23 + 1036.8 + 3143.8 + 881.64 + 0 = 7,387 \][/tex]
Therefore, the total current-year depreciation allowance for Casper's business is $7,387.