CPA Quiz: Calculate Depreciation Using Macrs
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Calculate Depreciation Using MacrsQuestion 1 of 20

On July 1, 2025, an S Corporation purchased and placed in service new office furniture (tangible personal property) costing $50,000 for use in its administrative office. The furniture is 7-year MACRS property (GDS) and the half-year convention applies; no Section 179 expense or bonus depreciation is elected. Calculate the MACRS depreciation for 2025.

$7,145
$5,000
$8,930
$3,575
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CPA Quiz: Calculate Depreciation Using Macrs

Practice Calculate Depreciation Using Macrs in CPA with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

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Question 1

On July 1, 2025, an S Corporation purchased and placed in service new office furniture (tangible personal property) costing $50,000 for use in its administrative office. The furniture is 7-year MACRS property (GDS) and the half-year convention applies; no Section 179 expense or bonus depreciation is elected. Calculate the MACRS depreciation for 2025.

  1. $7,145 (correct answer)
  2. $5,000
  3. $8,930
  4. $3,575
Explanation: This question tests MACRS depreciation for office furniture as tangible personal property under GDS with the half-year convention. The furniture is 7-year property costing $50,000, placed in service on July 1, 2025 (third quarter), without Section 179 or bonus depreciation. The correct deduction follows IRS guidelines using the 14.29% first-year rate, yielding $50,000 × 14.29% = 7,145.ChoiceB(7,145. Choice B (5,000) incorrectly applies a 10% rate, perhaps confusing with straight-line; choice C (8,930)usesthe17.868,930) uses the 17.86% mid-quarter rate for third quarter; choice D (3,575) halves the correct amount erroneously. For MACRS calculations, always determine the property's class life to select the recovery period, apply the convention, and use the corresponding percentage from IRS tables. This framework highlights the importance of matching the asset to its IRS-defined class life for compliant depreciation scheduling.

Question 2

On April 10, 2025, a C Corporation purchased and placed in service new manufacturing equipment (tangible personal property) for $120,000 to be used 100% in its production operations. The equipment is 7-year MACRS property (GDS) and the half-year convention applies; no Section 179 expense or bonus depreciation is elected. What is the allowable depreciation deduction for 2025 under MACRS?

  1. $8,571
  2. $17,148 (correct answer)
  3. $24,000
  4. $14,580
Explanation: This question tests the application of the Modified Accelerated Cost Recovery System (MACRS) for depreciating tangible personal property using the General Depreciation System (GDS) with the half-year convention. The key facts are that the manufacturing equipment is 7-year property with a cost basis of $120,000, placed in service in the second quarter of 2025, and no elections for Section 179 or bonus depreciation. The correct answer aligns with IRS MACRS guidelines because the first-year depreciation rate for 7-year property under the half-year convention is 14.29%, resulting in $120,000 × 14.29% = 17,148.ChoiceA(17,148. Choice A (8,571) is incorrect as it represents half of the first-year amount, possibly a misapplication of the convention; choice C (24,000)wronglyappliesthe2024,000) wrongly applies the 20% rate for 5-year property; choice D (14,580) might stem from using an incorrect rate like 12.15%. To calculate MACRS depreciation generally, identify the asset's class life to determine the recovery period, then apply the appropriate convention and depreciation table percentages. Emphasizing proper selection of class life and recovery period ensures accurate deductions over the asset's useful life as per IRS rules.

Question 3

A calendar-year company made the following purchases of depreciable personal property during the year:

  • February 1: Machine for $150,000 (7-year property)
  • June 15: Computer for $50,000 (5-year property)
  • November 30: Equipment for $225,000 (7-year property)

Which depreciation convention must the company use for its personal property for the current year?

  1. Full-year convention
  2. Half-year convention
  3. Mid-month convention
  4. Mid-quarter convention (correct answer)
Explanation: The correct answer is Mid-quarter convention. The mid-quarter convention must be used if more than 40% of the total depreciable basis of personal property is placed in service during the last three months (the fourth quarter) of the tax year. First, calculate the total basis of property placed in service: $150,000 + $50,000 + $225,000 = $425,000. Next, determine the basis of property placed in service in the fourth quarter (October, November, December): $225,000. Finally, calculate the percentage: $225,000 / $425,000 = 52.9%. Since this is greater than 40%, the mid-quarter convention is required for all personal property placed in service during the year.

Question 4

A company is required to use the mid-quarter convention for all assets placed in service during the year. On October 5, it purchased and placed in service a new machine (7-year property) for $200,000. The applicable first-year MACRS percentage for 7-year property placed in service in the fourth quarter is 3.57%.

What is the MACRS depreciation deduction for this machine in its first year of service?

  1. $3,570
  2. $7,140 (correct answer)
  3. $14,290
  4. $28,570
Explanation: The correct answer is $7,140. The mid-quarter convention applies. The machine was placed in service in the fourth quarter. The first-year depreciation percentage for 7-year property placed in service in the fourth quarter is 3.57%. The calculation is: $200,000 (cost) * 3.57% = $7,140.

Question 5

On May 20 of the current year, a taxpayer purchased and placed in service a residential rental property. The depreciable basis of the building is $330,000. What is the MACRS depreciation deduction for this property in the current year?

  1. $5,000
  2. $6,000
  3. $7,500 (correct answer)
  4. $12,000
Explanation: The correct answer is 7,500.Residentialrentalpropertyisdepreciatedusingthestraight−linemethodovera27.5−yearrecoveryperiodwithamid−monthconvention.SincethepropertywasplacedinserviceinMay,itistreatedasbeinginservicefor7.5monthsduringthefirstyear(fromthemiddleofMaytotheendofDecember).Thecalculationis:(7,500. Residential rental property is depreciated using the straight-line method over a 27.5-year recovery period with a mid-month convention. Since the property was placed in service in May, it is treated as being in service for 7.5 months during the first year (from the middle of May to the end of December). The calculation is: (330,000 depreciable basis / 27.5 years) * (7.5 months / 12 months) = $12,000 per year * (7.5/12) = $7,500.

Question 6

On February 2 of the current year, a partnership acquired and placed in service a commercial office building with a depreciable basis of $1,950,000. What is the MACRS depreciation expense for the building in the current year?

  1. $25,000
  2. $43,750 (correct answer)
  3. $50,000
  4. $64,375
Explanation: The correct answer is 43,750.Nonresidentialrealpropertyisdepreciatedusingthestraight−linemethodovera39−yearrecoveryperiodwithamid−monthconvention.ThebuildingwasplacedinserviceinFebruary,soitistreatedasbeinginservicefor10.5monthsduringthefirstyear(fromthemiddleofFebruarytotheendofDecember).Thecalculationis:(43,750. Nonresidential real property is depreciated using the straight-line method over a 39-year recovery period with a mid-month convention. The building was placed in service in February, so it is treated as being in service for 10.5 months during the first year (from the middle of February to the end of December). The calculation is: (1,950,000 depreciable basis / 39 years) * (10.5 months / 12 months) = $50,000 per year * (10.5/12) = $43,750.

Question 7

In Year 1, a company purchased and placed in service equipment (7-year property) for $50,000. The half-year convention was used. The MACRS depreciation percentage for Year 2 of 7-year property is 24.49%.

What is the MACRS depreciation deduction for the equipment in Year 2?

  1. $7,145
  2. $10,410
  3. $12,245 (correct answer)
  4. $14,286
Explanation: The correct answer is $12,245. For MACRS, the depreciation in subsequent years is calculated by multiplying the original basis of the asset by the applicable percentage from the IRS tables for that year. The adjusted basis is not used in the calculation. The calculation is: $50,000 (original cost) * 24.49% (Year 2 percentage) = $12,245.

Question 8

An investor owns a commercial warehouse that was placed in service on April 1, Year 1. The depreciable basis of the warehouse was $780,000. What is the MACRS depreciation deduction for the warehouse in Year 3, a full taxable year?

  1. $18,750
  2. $20,000 (correct answer)
  3. $28,364
  4. $19,538
Explanation: The correct answer is $20,000. A commercial warehouse is nonresidential real property, which is depreciated using the straight-line method over 39 years. While the first year's depreciation is prorated based on the month placed in service using the mid-month convention, any subsequent full year of service (like Year 3) receives a full year's straight-line depreciation. The calculation is: $780,000 depreciable basis / 39 years = $20,000.

Question 9

In Year 1, a taxpayer purchased a machine (7-year property) for $80,000 and used the half-year convention. In Year 4, on October 20, the taxpayer sold the machine. The applicable MACRS depreciation percentage for 7-year property for a full Year 4 is 12.49%.

What is the MACRS depreciation deduction for the machine in Year 4, the year of its disposition?

  1. $0
  2. $4,996 (correct answer)
  3. $7,910
  4. $9,992
Explanation: The correct answer is $4,996. When personal property that was subject to the half-year convention is disposed of, the half-year convention is also applied in the year of disposition. This means the taxpayer is entitled to one-half of the depreciation that would have been allowed for a full year. The calculation is: $80,000 (original basis) * 12.49% (full year rate) * 1/2 = $4,996.

Question 10

In Year 1, a company placed in service a single asset: a computer (5-year property) on February 15, at a cost of $30,000. The company was required to use the mid-quarter convention. On August 1 of Year 3, the company sold the computer. The MACRS percentage for a full Year 3 for 5-year property is 19.20%.

What is the MACRS depreciation deduction for the computer in Year 3, the year of sale?

  1. $1,440
  2. $2,880
  3. $3,600 (correct answer)
  4. $5,760
Explanation: The correct answer is $3,600. When property subject to the mid-quarter convention is sold, the disposition is also treated as occurring at the midpoint of the quarter in which it is sold. First, calculate the depreciation for a full year: $30,000 * 19.20% = $5,760. The computer was originally Q1 property. It was sold in Q3 (August 1). For a Q1 asset sold in Q3, it is considered owned for 2.5 quarters. The depreciation is calculated as: $5,760 * (2.5 quarters / 4 quarters) = $3,600.

Question 11

A taxpayer places in service new office furniture costing $21,000 on March 1. The furniture is 7-year GDS property. The taxpayer makes an election to use the Alternative Depreciation System (ADS). What is the first-year depreciation deduction under ADS?

  1. $1,050 (correct answer)
  2. $1,500
  3. $2,100
  4. $3,001
Explanation: The correct answer is 1,050.UnderADS,officefurniturehasa10−yearrecoveryperiod.ADSrequirestheuseofthestraight−linemethod.Thehalf−yearconventionmustalsobeusedforpersonalpropertyunderADS(unlessthemid−quarterconventionistriggered).Thecalculationis:(1,050. Under ADS, office furniture has a 10-year recovery period. ADS requires the use of the straight-line method. The half-year convention must also be used for personal property under ADS (unless the mid-quarter convention is triggered). The calculation is: (21,000 cost / 10 years) * 1/2 (half-year convention) = $1,050.

Question 12

A technology consulting firm purchases several new assets during the year. For MACRS GDS purposes, which of the following assets is classified as 7-year property?

  1. A new light-duty passenger van used to transport employees.
  2. A new server and network routers.
  3. The office building where the firm operates.
  4. New desks, chairs, and conference tables for the office. (correct answer)
Explanation: The correct answer is D. Desks, chairs, and conference tables are office furniture, which is classified as 7-year property under MACRS GDS. Choice A (passenger van) is 5-year property. Choice B (server and routers) is computer equipment, which is 5-year property. Choice C (office building) is nonresidential real property, which is 39-year property.

Question 13

On May 1, 2024, a business purchased new qualifying equipment (7-year property) for $300,000. The business properly elected to take 60% bonus depreciation. What is the amount of the regular MACRS depreciation deduction for the equipment in 2024, in addition to the bonus depreciation?

  1. $17,148 (correct answer)
  2. $25,722
  3. $42,870
  4. $72,000
Explanation: The correct answer is $17,148. First, calculate the bonus depreciation: $300,000 * 60% = $180,000. Next, reduce the asset's basis by the bonus depreciation amount to find the remaining basis for regular MACRS depreciation: $300,000 - $180,000 = $120,000. Finally, calculate the regular MACRS depreciation on the remaining basis using the 7-year property, half-year convention rate of 14.29%: $120,000 * 14.29% = $17,148.

Question 14

In the current year, a calendar-year company placed the following 7-year MACRS property in service. This was all the property acquired during the year.

  • Asset 1: $60,000 on March 15
  • Asset 2: $40,000 on August 20
  • Asset 3: $30,000 on October 5

What is the total MACRS depreciation for the year?

  1. $13,000
  2. $18,577 (correct answer)
  3. $16,535
  4. $37,143
Explanation: The correct answer is $18,577. First, determine the applicable convention. Total property placed in service is $60,000 + $40,000 + $30,000 = $130,000. Property placed in the fourth quarter (Oct-Dec) is $30,000. The percentage is $30,000 / $130,000 = 23.1%. Since this is not more than 40%, the half-year convention applies to all assets. The total depreciable basis is $130,000. Depreciation for 7-year property in the first year is 14.29%. Total depreciation is $130,000 * 14.29% = $18,577.

Question 15

On July 1 of the current year, a taxpayer converts a personal-use auto to 100% business use. The auto was purchased two years ago for $40,000. Its fair market value on the date of conversion is $25,000.

What is the MACRS depreciation deduction for the auto in the current year, assuming no special elections are made?

  1. $4,000
  2. $5,000 (correct answer)
  3. $8,000
  4. $10,000
Explanation: The correct answer is $5,000. When property is converted from personal to business use, the basis for depreciation is the lesser of the property's adjusted basis or its fair market value (FMV) at the time of conversion. Here, the adjusted basis is $40,000 and the FMV is $25,000. Therefore, the depreciable basis is $25,000. An auto is 5-year property, and the half-year convention applies. The first-year depreciation rate is 20%. The calculation is: $25,000 * 20% = $5,000.

Question 16

A taxpayer purchases a new computer system for $5,000. The computer is 5-year property for GDS purposes and also has a 5-year recovery period under ADS. Assume the half-year convention applies. What is the difference in the first-year depreciation deduction between using MACRS GDS (200% declining balance) and MACRS ADS (straight-line)?

  1. $0
  2. $500 (correct answer)
  3. $1,000
  4. $1,500
Explanation: The correct answer is $500. First, calculate GDS depreciation: $5,000 * 20% (Year 1, 5-year, half-year rate) = 1,000.Next,calculateADSdepreciation.ADSforthispropertyusesthestraight−linemethodover5yearswiththehalf−yearconvention:(1,000. Next, calculate ADS depreciation. ADS for this property uses the straight-line method over 5 years with the half-year convention: (5,000 / 5 years) * 1/2 = $500. The difference is $1,000 (GDS) - $500 (ADS) = $500.

Question 17

A farming business acquires $200,000 of new farm machinery (7-year property) on June 1. The business elects to use the 150% declining balance method over the GDS recovery period. What is the first-year depreciation deduction?

  1. $15,000
  2. $21,429 (correct answer)
  3. $28,571
  4. $42,857
Explanation: The correct answer is $21,429. The 150% declining balance method is used over the 7-year GDS recovery period, and the half-year convention applies. The straight-line rate is 1/7, or 14.2857%. The 150% DB rate is 14.2857% * 1.5 = 21.4286%. For the first year, this rate is applied with the half-year convention. Calculation: $200,000 * 21.4286% * 0.5 = $21,428.60, rounded to $21,429.

Question 18

A new calendar-year corporation begins business on August 1, 2024. On September 15, 2024, the corporation purchases and places in service a residential rental building for $412,500. The corporation's first tax year is a short tax year from August 1 to December 31, 2024.

What is the MACRS depreciation deduction for the building for the short tax year ending December 31, 2024?

  1. $4,375 (correct answer)
  2. $6,250
  3. $7,500
  4. $15,000
Explanation: The correct answer is $4,375. For real property, the mid-month convention applies regardless of whether the tax year is short or full. Depreciation is calculated based on the number of months the property is in service. The building was placed in service in September. It is considered in service for 3.5 months (mid-September, October, November, December). First, find the full-year depreciation: $412,500 / 27.5 years = $15,000. Then, prorate for the months in service: $15,000 * (3.5 / 12) = $4,375.

Question 19

An asset with an original basis of $70,000 (7-year property) was sold on March 15 of Year 5. The half-year convention was used when it was placed in service. The accumulated depreciation at the beginning of Year 5 was $52,493. The MACRS table percentage for a full Year 5 is 8.93%.

What is the asset's adjusted basis for determining gain or loss on the sale?

  1. $11,256
  2. $14,379 (correct answer)
  3. $17,507
  4. $8,128
Explanation: The correct answer is $14,379. To determine the adjusted basis at the time of sale, you must first calculate the depreciation for the year of sale. Since the half-year convention was used at acquisition, it must also be used for disposition. Full Year 5 depreciation would be $70,000 * 8.93% = $6,251. Depreciation in the year of sale is half of that: $6,251 * 0.5 = $3,125.50. Total accumulated depreciation is the beginning balance plus the current year's depreciation: $52,493 + $3,125.50 = $55,618.50. The adjusted basis is the original basis less total accumulated depreciation: $70,000 - $55,618.50 = $14,381.50. The closest answer is $14,379.

Question 20

A taxpayer owns a residential rental property that was placed in service several years ago. The property has a depreciable basis of $275,000. On July 10 of the current year, the taxpayer sells the property. What is the amount of MACRS depreciation for the property in the year of sale?

  1. $4,167
  2. $5,000
  3. $5,417 (correct answer)
  4. $10,000
Explanation: The correct answer is $5,417. Real property uses the mid-month convention for the year of disposition. First, calculate the full-year straight-line depreciation: $275,000 basis / 27.5 years = $10,000. The property was sold in July, so it is considered to have been in service for 6.5 months (January through June, plus half of July). The depreciation for the year of sale is calculated as: $10,000 * (6.5 months / 12 months) = $5,417.