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Hazel purchased a new business asset (five-year asset) on September 30, 2017, at a cost of $100,000. On October 4, 2017, Hazel placed the asset in service. This was the only asset Hazel placed in service in 2017. Hazel did not elect § 179 or additional first-year depreciation. On August 20, 2018, Hazel sold the asset. Determine the cost recovery for 2018 for the asset.
a. $14,250
b. $19,000
c. $23,750
d. $38,000
e. None of the above

Answer :

Karabo99

Answer:

The cost recovery for 2018 for the asset is $23,750.

Explanation:

The asset was placed in service on october, 2018, as a result mid quarter convention is used. 2019 is the second year of cost recovery,

= $100,000 × 38%

= $38,000

cost of recovery = $38,000 × 2.5/4

                           = $23,750

Therefore, The cost recovery for 2018 for the asset is $23,750.

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