Bonnie Jo purchased a used computer (5-year property)for use in her sole proprietorship.The basis of the computer was $2,400.Bonnie Jo used the computer in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year.Calculate Bonnie Jo's depreciation expense during the first year assuming the sole proprietorship had a loss during the year (Bonnie did not place the property in service in the last quarter).(Use MACRS Table 1 in the text)
A) $240.
B) $288.
C) $480.
D) $2,400.
E) None of the choices are correct.

Question

Bonnie Jo purchased a used computer (5-year property)for use in her sole proprietorship.The basis of the computer was $2,400.Bonnie Jo used the computer in her business 60 percent of the time and used it for personal purposes the rest of the time during the first year.Calculate Bonnie Jo's depreciation expense during the first year assuming the sole proprietorship had a loss during the year (Bonnie did not place the property in service in the last quarter).(Use MACRS Table 1 in the text)
A) $240.
B) $288.
C) $480.
D) $2,400.
E) None of the choices are correct.

Quizplus · Accepted Answer

According to MACRS Table 1, the depreciation rate for 5-year property for the first year of use, assuming the half-year convention, is 20%. Since Bonnie Jo used the computer 60% of the time for business purposes, her depreciation expense would be 60% x 20% x $2,400 = $288. The fact that the sole proprietorship had a loss during the year is irrelevant to the computation of depreciation expense.

Bonnie Jo Purchased a Used Computer (5-Year Property)for Use in Her