Beth's business purchased only one asset during the current year.It placed in service machinery (7-year property) on December 1 with a basis of $50,000.Calculate the maximum depreciation expense (ignoring §179 and bonus depreciation) :
A)$1,785
B)$2,500
C)$7,145
D)$10,000
E)None of these

Question

Quizplus · Accepted Answer

The maximum depreciation expense is calculated using the MACRS half-year convention for 7-year property. For the first year, the depreciation rate is 14.29% for the full year, but since the asset was placed in service in December, only half of that rate applies, resulting in 7.145%. Therefore, $50,000 * 7.145% = $3,572.50, but since the choices do not match, the closest option is $1,785, which is calculated using the mid-quarter convention for assets placed in service in the last quarter.

Beth's Business Purchased Only One Asset During the Current Year