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12 March, 21:51

On March 1, 2019, Babar Inc., pays $1,200,000 for a store building, moves into the building, and begins business on April 1. Babar properly allocates $1,020,000 of its cost to the building and $200,000 to the land. On May 21, 2019, it installs $1,043,000 worth of new display shelving. Babar wants to claim the maximum allowable depreciation on the property it purchased but does not want to claim bonus depreciation. On January 2, 2022, Babar sells the land and building for $1,400,000 and the display shelving for $45,000.

Required:

Determine Babar's maximum depreciation deduction for 2019 and 2022.

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Answers (1)
  1. 12 March, 22:03
    0
    2019

    $204,3000

    2022

    No Depreciation

    Explanation:

    Purchase Price of Store building = $1,200,000

    Allocation

    Building cost = $1,000,000

    Land cost = $200,000

    Display Shelving Installation cost = $1,043,000

    The Land will not be depreciated, Building and Display shelving will be depreciated by 10% per year

    2019

    Depreciation

    Full depreciation will be charged in the year of purchase.

    Building = $1,000,000 x 10% = $100,000

    Display Shelving = $1,043,000 x 10% = $104,300

    Total Depreciation = $100,000 + $104,300 = $204,3000

    2022

    No depreciation will be charged in the year of sale.
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