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7 November, 15:09

Determine the adjusted basis of each of the following assets:

a. Leineia purchased an automobile 2 years ago for $30,000. She uses it 75% in her business and 25% for personal use. To date, she has deducted $4,209 in allowable depreciation on the business use portion of the automobile.

b. Three years ago, Quon purchased an office building for $330,000. The purchase price was properly allocated as $250,000 to the building and $80,000 to the land. Building remodeling cost $8,000. He paid $12,000 for the installation of a parking lot and sidewalks. Insurance premiums on the building are $5,000 per year. Quon has deducted total allowable depreciation on the building of $70,620 and $1,000 on the land improvements for the 3 years.

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  1. 7 November, 15:18
    0
    Answer and Explanation:

    The computation is shown below:

    75% 25% 100%

    Particulars Business Use Personal Use Total

    Initial Basis $22,500 $7,500 $30,000

    Less: Depreciation - $4,209 0 - $4,209

    Adjusted Basis $18,291 $7,500 $25,791

    b

    Particulars Building Land Land Improvements

    Original Cost $250,000 $80,000

    Remodeling cost $8,000

    Parking lot and sidewalks $12,000

    Depreciation - $70,620 - $1,000

    Adjusted basis $187,380 $80,000 $110,000

    We simply classify the cost to each type of asset which is shown above
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