Phil owns a ranch business and uses four-wheelers for work. In year 1, he drove his four-wheeler 1,088 miles total, with 243 miles for personal use. He bought the four-wheeler on January 15 for $11,900. Using MACRS depreciation tables, the allowable depreciation for year 1 is calculated to be $1,848 based on the half-year convention for an asset purchased mid-year. In year 2, he drove 1,330 miles total with 620 miles for personal use. The allowable depreciation for year 2 is calculated to be $6,353 based on the business use percentage.

1. Phil owns a ranch business and uses four-wheelers to do much of his work. Occasionally,
though, he and his boys will go for a ride together as a family activity. During year 1, Phil put
1,088 miles on the four-wheeler that he bought on January 15 for $11,900. Of the miles driven,
only 243 miles was for personal use. Assume four-wheelers qualify to be depreciated according
to the five-year MACRS schedule and the four-wheeler was the only asset Phil purchased this
year. (Use MACRS Table 1, Table 2, Table 3,Table 4 and Table 5.) (Do not round
intermediate calculations. Round your final answers to the nearest whole dollar amount.)
Calculate the allowable depreciation for year 1 (ignore the §179 expense and bonus
depreciation).
Calculate the allowable depreciation for year 2 if total miles were 1,330 and personal use miles
were 620 (ignore the §179 expense and bonus depreciation).
Phil owns a ranch business and uses four-wheelers to do much of his work. Occasionally,
though, he and his boys will go for a ride together as a family activity. During year 1, Phil put
1,088 miles on the four-wheeler that he bought on January 15 for $11,900. Of the miles driven,
only 243 miles was for personal use. Assume four-wheelers qualify to be depreciated according
to the five-year MACRS schedule and the four-wheeler was the only asset Phil purchased this
year. (Use MACRS Table 1, Table 2, Table 3,Table 4 and Table 5.) (Do not round
intermediate calculations. Round your final answers to the nearest whole dollar amount.)
Solution
We have to consider only the business travel expense for depreciation calculation.
(a) Business travel expense = [Total miles - personal travel miles) / Total miles] x Total cost
= [(1088 -243) / 1088] x $11,900
= $9,242.19

2. Since the asset was purchased on 15th january, we need to use the half-yearly convention. The
depreciation amount is calculated, as follows.
(b) Depreciable amount = [(1330 - 620) / 1330] x $11,900
= $6,352.63
NOTE: Source of MACRS depreciation rates & Convention to be used:
http://www.smbiz.com/sbrl012.html
DEPRECIATION: YEAR 1
TOTAL
($)
DEPRECIATION
(%)
DEPRECIATION
($)
Half-Yearly 9,242.19 20 1,848.44