Lax, LLC Purchased Only One Asset During the Current Year

question 24

Multiple Choice

Lax, LLC purchased only one asset during the current year (a full 12-month tax year) . Lax placed in service computer equipment (5-year property) on August 26 with a basis of $20,000. Calculate the maximum depreciation expense for the current year (ignoring §179 and bonus depreciation) . (Use MACRS Table 1)

• A) $2,000.
• B) $2,858.
• C) $3,000.
• D) $4,000.
• E) None of the choices are correct.

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Definitions:

Cash Dividends

Distributions of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders in the form of cash.

Stock Dividend

A type of dividend payment made in the form of additional shares of stock rather than cash, often used by companies to conserve cash.

Par Value

The nominal or face value of a bond, stock, or other financial instrument, representing the amount to be repaid at maturity.

Market Price

Market price is the current price at which an asset or service can be bought or sold in a competitive marketplace.