1. If Hillsborough Architecture and Engineering purchases a new office building in May for $5.7M, determine the allowable depreciation for each year.
2. On July 1, Nancy paid $600,000 for a commercial building and an additional $150,000 for the land on which it stands. Four years later, also on July 1, she sold the property for $850,000. Compute the modified accelerated cost recovery system depreciation for each of the five calender years during which she had the property.
3. Equipment costing $20,000 that is a MACRS 3-year property is disposed of during the second year for $12,000. Calculate any depreciation recapture, ordinary losses, or capital gains associated with disposal of the equipment.
4. American Pulp Corp. (APC) has entered into a contract to harvest timber for $450,000. The total estimated available harvest is 150 million board-feet.
a. What is the depletion allowance for years 1 to 3, if 42,45, and 35 million board-feet are harvested by APC in those years?
b. After 3 years, the total available harvest for the original tract was reestimated at 180 million board-feet. Compute the depletion allowances for Years 4 and beyond.
5. Western Carolina Coal Co. expects to produce 125,000 tons of coal annually for 15 years. The deposit cost $2M to acquire; the annual gross revenues are expected to be $9.50 per ton, and the net revenues are expected to be $4.25 per ton.
a. Compute the annual depletion on a coast basis.
b. compute the annual depletion on a percentage basis.