REG – Depreciation Mid-quarter Convention

CPA Exam Forum FAR FAR Review REG – Depreciation Mid-quarter Convention

This topic contains 4 replies, has 0 voices, and was last updated by  Soproudofmyself 4 years, 7 months ago.

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  • #166027

    Soproudofmyself
    Participant

    Help!

    I don’t think understand how the mid-quarter convention works.

    It applies to machinery & equipment. If > 40% of it placed in service in the last quarter of the year….but how do you calculate it?

    Is this right?

    Quick Example:

    Machinery & Equipment falling in the 7 year 200% class….

    Office furniture : $1,000 (placed in service in Sept 2011)

    Office equip : $2,000 (placed in service in Nov 2011)

    66% placed in service in the last quarter of the year so the mid-quarter convention applies.

    Is the depreciation $107 for the year? Half of the last quarter x 200%?

    Maybe it’s a silly question, but I’m not taking any chances this time =(

    #322853

    Minimorty
    Participant

    $3,000 in equipment / 7 years (straight line) = $428.57

    $428.57 times 2 (double-declining) = $857.14

    $857.14 / 4 quarters = $214.26

    $214.26 times 1/2 of the quarter = $107.14

    Yup, looks like I got the same.

    #322854

    Soproudofmyself
    Participant

    Yay! Thanks for trying that with me =)

    #322855

    Minimorty
    Participant

    Make sure you remember that the equipment must be placed into service by the end of the year. Dont be fooled if they throw in a trick like “purchased on December 15th and placed into service on January 5th.” You wouldnt be able to depreciate that piece of equipment until the year you actually placed it into service.

    #322856

    Soproudofmyself
    Participant

    good point! they love to trick us…

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