Wendell Purchased a Computer System for $6,000 on June 1

question 109

Essay

Wendell purchased a computer system for $6,000 on June 1 of year 1. He kept records of his computer usage and found out he used the computer 45 percent of the time for his business, 20 percent for tracking his extensive investment portfolio and making trades, and the remaining time was for personal use in both years.
a. Determine Wendell's depreciation deductions in years 1 and 2.
b. In year 3, Wendell's usage remained the same but he decided to dispose of the computer on November 1. Determine his year 3 depreciation deduction and his gain or loss on the disposition if he received $2,500 for the system.

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Definitions:

Consecutive GICs

A sequence of Guaranteed Investment Certificates held one after another, often to create a ladder strategy for managing interest rate risk.

Interest Rates

The amount charged, expressed as a percentage of principal, by a lender to a borrower for the use of assets.

Term Deposit

A bank deposit that has a fixed term or period of time until you can access your money, often with a higher interest rate than savings accounts.

Promissory Note

A financial document in which one party promises to pay another party a definite sum of money at a specified future date or on demand.