Timothy Purchased a New Computer for His Consulting Practice on October

question 64

Essay

Timothy purchased a new computer for his consulting practice on October 15^th of the current year. The basis of the computer was $4,000. During the Thanksgiving holiday, he decided the computer didn't meet his business needs and gave it to his college-aged son in another state. The computer was never used for business purposes again. Timothy had $50,000 of taxable income before depreciation. What is Timothy's total cost recovery expense with respect to the computer during the current year?

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Definitions:

Favorable Trend

A pattern or movement in financial or operational data that suggests positive performance or outcomes for a business.

Book Value

The net value of a company's assets found on its balance sheet, and is calculated by subtracting liabilities from the total assets.

Machinery

Equipment, especially those powered by fuel or electricity, used in the industrial production or manufacturing process.

Accumulated Depreciation

The overall depreciation cost that has been allocated to a fixed asset over the span of its useful life.