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)
A) $240.
B) $288.
C) $480.
D) $2,400.
E) None of the choices are correct.

Question

Quizplus · Accepted Answer

Since Bonnie used the computer in her business 60% of the time and for personal purposes the remaining 40%, only 60% of the basis of the computer is depreciable, which is $1,440 ($2,400 x 60%). 
Using MACRS Table 1 and the 5-year property classification, the depreciation rate for the first year is 20%. 
So, depreciation expense for the first year will be $288 ($1,440 x 20%). 
Even though Bonnie's sole proprietorship had a loss during the year, depreciation is still deductible as it is a non-cash expense.

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