Wu Copy Shop purchases a new copy machine in July 2018 for $30,000. No other depreciable assets are placed in service in 2018. Since Wu Copy Shop expects to be in a much higher tax bracket in future years, it desires to minimize its current cost recovery amount to the fullest extent possible. What is the amount of Wu Copy Shop's ADS depreciation for 2018?
A)$1,500
B)$3,000
C)$4,500
D)$5,400
E)$6,000

Question

Quizplus · Accepted Answer

The Alternative Depreciation System (ADS) requires using a straight-line method over a longer recovery period. For a copy machine, the ADS recovery period is 10 years. Therefore, the depreciation for 2018 is $30,000 / 10 = $3,000. However, since the machine was placed in service in July, only half-year depreciation is allowed, resulting in $1,500 for 2018.

Wu Copy Shop Purchases a New Copy Machine in July