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A metal fabrication company is buying a CNC machine for $600,000. After 20 years of use, the machine should have a salvage value of $35,000.

Required:
a. Under 100% bonus depreciation, what depreciation can be claimed in year 1?
b. Under 100% bonus depreciation, what depreciation can be claimed in year 2?

Respuesta :

anthougo

Answer:

100% Bonus Depreciation:

a. Year 1 = $565,000

b. Year 2 = $0

Explanation:

a) Data and Calculations:

Cost of CNC Machine = $600,000

Salvage value = $35,000

Depreciable amount = $565,000 ($600,000 - $35,000)

100% Bonus Depreciation:

Year 1 = $565,000

Year 2 = $0

b) The 100% bonus depreciation is not limited to the firm's taxable income. The firm can carry back loss arising from 100% bonus depreciation to previous year's income and also carry any unused loss forward to deduct against future income.

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