An asset (not an automobile) put in service in June 2015 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming half-year convention, no bonus depreciation, and no election to expense is made, what is the maximum amount of cost that can be deducted in 2015?

Question

Sanaa Wagner

Business

1 July, 18:03

An asset (not an automobile) put in service in June 2015 has a depreciable basis of $35,000 and a recovery period of 5 years. Assuming half-year convention, no bonus depreciation, and no election to expense is made, what is the maximum amount of cost that can be deducted in 2015?

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Answers (1)

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Maia Robbins · Answer 1

Answer:$3,500

Explanation:

Depreciation is a method of reducing the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero.

Depreciable value of an asset is the difference between the combined cost of purchase and installation of an asset that can be depreciated and its salvage value.

There are various method of calculating depreciation but the most common and easy is the straight line method.

Here, the depreciable basis is $35,000 and with a period of 5 years in June, 2015.

Therefore, we say

50% (0.5) multiply by $35,000 which gives us a value of $17,500.

So, 20% (0.2) multiply by $17,500 gives $3,500.

Therefore, the cost that can be deducted in June is $3,500.