During 2018, Duncan Purchases and Places in Service Office Equipment

question 40

Multiple Choice

During 2018, Duncan purchases and places in service office equipment with a cost of $40,000. The equipment is 7-year MACRS property with an ADS recovery period of 10 years. Duncan desires to avoid the AMT. What is his minimum 2018 depreciation deduction?

• A)$2,000
• B)$2,857
• C)$3,000
• D)$4,000
• E)$5,714

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Definitions:

Contribution Format

A type of income statement formatting that separates fixed and variable costs, helping to analyze the impact of sales volume on net income.

Net Operating Income

The total profit of a company after operating expenses are subtracted from operating revenues, excluding non-operating income and expenses.

Contribution Margin Ratio

The percentage of each sales dollar that contributes toward covering fixed costs and generating profit.

Fixed Monthly Expenses

Recurring expenses that do not change in amount from month to month, such as rent, salaries, and insurance premiums.