Answered

Welcome to Westonci.ca, where finding answers to your questions is made simple by our community of experts. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform. Discover in-depth answers to your questions from a wide network of professionals on our user-friendly Q&A platform.

On November 4, 2018, Blue Company acquired an asset (27.5-year residential real property) for $200,000 for use in its business. In 2018 and 2019, respectively, Blue took $642 and $5,128 of cost recovery. These amounts were incorrect; Blue applied the wrong percentages (i.e., those for 39-year rather than 27.5-year property). Blue should have taken $910 and $7,272 of cost recovery in 2018 and 2019, respectively. On January 1, 2020, the asset was sold for $180,000. If required, round all computations to the nearest dollar.
a. The adjusted basis of the asset at the end of 2017 is $.
b. The cost recovery deduction for 2018 is $.
c. The__________ on the sale of the asset in 2018 is $

Sagot :

abiolataiwo2015

Answer:

A. $191,818

B. $303

C. $11,515 loss

Explanation:

A) Calculation to determine what The adjusted basis of the asset at the end of 2017 is

2017 Asset's cost $200,000

Less recovery costs for 2017 and 2018

($910 + $7,272 = $8,182

December 31, 2018 $191,818

($200,000 - $8,182)

Therefore The adjusted basis of the asset at the end of 2017 is $191,818

B) Calculation to determine what The cost recovery deduction for 2018 is

Recovery cost = $200,000 x (1 / 27.5) x (0.5 / 12)

Recovery cost = $200,000 x3.636% × .5/12)

Recovery cost = $303

Therefore The cost recovery deduction for 2018 is $303

C) the asset's basis on the date of sale is = $191,818 - $303 = $191,515

Sales price - asset basis = $180,000 - $191,515 = $11,515 loss

Blue Company lost $11,515 when it sold the asset.

$.

c. The__________ on the sale of the asset in 2018 is $

Thank you for trusting us with your questions. We're here to help you find accurate answers quickly and efficiently. Thanks for using our service. We're always here to provide accurate and up-to-date answers to all your queries. Thank you for using Westonci.ca. Come back for more in-depth answers to all your queries.