**Case Study: Depreciation Calculation for Business Vehicle****Scenario Overview:**Lina purchased a new car for use in her business during 2021. This vehicle was the only business asset she acquired that year, and her business was very profitable. The task is to calculate Lina’s maximum depreciation deductions, including the Section 179 expense (unless specified otherwise), for the automobile in 2021 and 2022. Lina opts not to take bonus depreciation for 2021 or 2022. This calculation is based on the half-year convention using the Modified Accelerated Cost Recovery System (MACRS). For reference, consult MACRS Table 1, Table 2, and Exhibit 10-10.**Specific Case:**- **Vehicle Cost:** $92,000- **Business Use Percentage:** 80%- **Sale Date:** March 1 of year 2**Depreciation Details:**- **Depreciation Timeline:** - **2021:** The table does not specify an exact deduction amount. - **2022:** The table shows a blank deduction amount due to the vehicle's sale before the end of the recovery period.**Table Explanation:**- The table has two columns. The first column, labeled "Year," lists the years 2021 and 2022.- The second column, labeled "Depreciation deduction," is intended to report the calculated deduction for each respective year, but it appears blank, indicating further calculation is required to populate exact values.This exercise demonstrates the process of calculating allowable depreciation for business assets using tax regulation frameworks, specifically focusing on scenarios involving partial-year ownership and use. ### MACRS Mid-Quarter Convention Tables for Property Depreciation#### TABLE 2a: For Property Placed in Service During the First Quarter(Not shown in the image)#### TABLE 2b: For Property Placed in Service During the Second QuarterThis table outlines the depreciation rates under the MACRS Mid-Quarter Convention for assets placed in service during the second quarter.| Depreciation Rate for Recovery Period | 5-Year | 7-Year ||--------------------------------------|--------|--------|| Year 1 | 25.00% | 17.85% || Year 2 | 30.00% | 23.47% || Year 3 | 18.00% | 16.76% || Year 4 | 11.37% | 11.97% || Year 5 | 11.37% | 8.87% || Year 6 | 4.26% | 8.87% || Year 7 | | 8.87% || Year 8 | | 3.34% |#### TABLE 2c: For Property Placed in Service During the Third QuarterThis table provides the depreciation rates for assets placed in service during the third quarter.| Depreciation Rate for Recovery Period | 5-Year | 7-Year ||--------------------------------------|--------|--------|| Year 1 | 15.00% | 10.71% || Year 2 | 34.00% | 25.51% || Year 3 | 20.40% | 18.22% || Year 4 | 12.24% | 13.02% || Year 5 | 11.30% | 9.30% || Year 6 | 7.06% | 8.85% || Year 7 | | 8.86% || Year 8 | | 5.53% |#### TABLE 2d: For Property Placed in Service During the Fourth QuarterThe following table shows the depreciation rates for assets placed in service during the fourth quarter.| Depreciation Rate for Recovery Period | 5-Year | 7-Year ||--------------------------------------|--------|

Depreciation refers to the amount that is charged on the fixed assets by which the asset value…

Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including $179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn't want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) d. The vehicle cost $92,000, and she used it 80 percent for business. She sold it on March 1 of year 2. Depreciation deduction Year 2021 2022

Lina purchased a new car for use in her business during 2021. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including $179 expense unless stated otherwise) for the automobile in 2021 and 2022 (Lina doesn't want to take bonus depreciation for 2021 or 2022) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1, Table 2, and Exhibit 10-10.) d. The vehicle cost $92,000, and she used it 80 percent for business. She sold it on March 1 of year 2. Depreciation deduction Year 2021 2022

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Vishnu
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! Required information [The following information applies to the questions displayed below.] Lina purchased a new car for use in her business during 2023. The auto was the only business asset she purchased during the year, and her business was extremely profitable. Calculate her maximum depreciation deductions (including $179 expense unless stated otherwise) for the automobile in 2023 and 2024 (Lina doesn't want to take bonus depreciation for 2023 or 2024) in the following alternative scenarios (assuming half-year convention for all): (Use MACRS Table 1. Table 2, and Exhibit 10-10.) c. The vehicle cost $84,600, and she used it 80 percent for business. Depreciation deduction Year 2023 $ 12,200 2024 $ 19,500
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