[Anonymous]

Rockford Corp, a calendar year taxpayer, purchased used furniture and fixtures for use in its business and placed the property in service on December 1, 2012. The furniture and fixtures cost $112,000 and represented Rockford’s only acquisition of depreciable property during the year. Rockford id not make any special elections with regard to depreciation and did not elect to expense any part of the cost of the property under Sec. 179. What is the amount of Rockford Corp/s depreciation deduction for the future and fixtures under MACRS for 2012?

A: 8,000

B: 32,000

C: 4,000

D: 16,000

Answer: C. 112,000*(2/7)*(1/8)=4000

Where did the 2/7 and 1/8 come from?

[NYCaccountant]

1/8 is 12.5%, which is 1 half of a quarter. Technically, I would do it like this:

112,000/7=16,000

16,000/112,000=14.287 Percent

14.287 Percent * 2 (because of double decline)= 28.57 percent

28.57*112,000=32,000 Annual Depreciation (Assuming full year)

32,000/ 4 quarters = 8,000 per quarter

half of a quarter is 4,000 (8,000/2) Mid quarter.

2/7 is the depreciation rate for the first year. It's basically saying the asset has a life of 7 years and you are depreciating 2 years of that life.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

1/8 is 12.5%, which is 1 half of a quarter. Technically, I would do it like this:

112,000/7=16,000

16,000/112,000=14.287 Percent

14.287 Percent * 2 (because of double decline)= 28.57 percent

28.57*112,000=32,000 Annual Depreciation (Assuming full year)

32,000/ 4 quarters = 8,000 per quarter

half of a quarter is 4,000 (8,000/2) Mid quarter.

2/7 is the depreciation rate for the first year. It's basically saying the asset has a life of 7 years and you are depreciating 2 years of that life.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[Anonymous]

A, now I understand the 1/8, since it was bought during the 4th quarter and half of that quarter is 1/8, thanks man.

And for 2/7, so basically you just have to memorize that furniture and fixtures have a MACRS of 7 years? And that it is 2/7 instead of 1/7 because of double-declining?

[Anonymous]

A, now I understand the 1/8, since it was bought during the 4th quarter and half of that quarter is 1/8, thanks man.

And for 2/7, so basically you just have to memorize that furniture and fixtures have a MACRS of 7 years? And that it is 2/7 instead of 1/7 because of double-declining?

[NYCaccountant]

basically, yes.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[NYCaccountant]

basically, yes.

FAR - 93
REG - 87
BEC - 84!!!!
AUD - 99!!!!!! CPA exam complete.

[thehip41]

Here's how I get there.

112,000/7 = 16,000 year for SL

With MACRS, use DDB

so 16,000 x 2

$32,000 for the first year.

Since >40% was placed in service in the last quarter, use the mid quarter convention.

All assets were placed in service in Q4, so 12.5%

$32,000 x 12.5% = $4,000

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[thehip41]

Here's how I get there.

112,000/7 = 16,000 year for SL

With MACRS, use DDB

so 16,000 x 2

$32,000 for the first year.

Since >40% was placed in service in the last quarter, use the mid quarter convention.

All assets were placed in service in Q4, so 12.5%

$32,000 x 12.5% = $4,000

FAR - 83
AUD - 73 92
BEC - 83
REG - 88

Licensed CPA in the state of Michigan

[Author]

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