Chapter 13 Depreciation

There are more than 4.5 million corporations in the United States. While corporations represent only about one-fifth of all businesses, they account for almost nine-tenths of all sales revenues and more than three-quarters of all business profits in the country. One of the best-known American corporations is General Motors. Since its beginning in 1908, it has grown into the world's largest industrial corporation and full-line vehicle manufacturer. General Motors has a global presence in more than 200 countries. In addition to its motor vehicles, General Motors has considerable interests in telecommunications, aerospace, defense industries, as well as financial and insurance services. With more than 260 major subsidiaries, joint ventures, and affiliates, the company employs more than 397,000 people and it also partners with over 30,000 supplier companies worldwide. Numerous landmark events stand out in General Motors' long history. These events range from the construction of the GM building in 1908 to the completion of its 25,000,000th car in 1940 to record-breaking philanthropic giving in 1997.

General Motors supports various programs and events. For over a decade, GM has supported the national broadcasts of the Detroit Symphony Orchestra. GM is also a national tour sponsor of the Henrietta Marie, a 300-year-old English merchant slave ship. (Click on the ship's name to visit GM's interactive site about the artifacts found on board)

Besides remaining the world's leading industrial corporation, its purpose is also to keep in mind the GM heritage, and unique culture.

This information, and much more, may be found at www.gmc.com.

Problem:

Preparation:

In preparation for this problem,

• Review various methods of depreciation covered in Chapter 13 of your textbook.
• Visit www.toolkit.cch.com/text/P07_2960.asp, and review the information you find there regarding depreciation.

  Questions:

  1. The marketing slogan "Like a Rock" has been used to express the durability and high quality of GM products. General Motors promotes their trucks as tough-inside and out. For equipment with such a long life expectancy, it is important to calculate depreciation properly. Using the MARCS depreciation rates table on page 569 of your textbook, calculate the following depreciation. The New Perspectives Livings furniture store purchased a GM Chevy S-10 for $22,500. This new truck will be a part of their fleet of delivery trucks.

  1. Which of the nine recovery classes will this purchase be listed under?
  2. Under MACRS, what is the depreciation for years 1 and 2?

  2. Using information found at www.toolkit.cch.com/text/P07_2960.asp, complete the following.

  1. What reason would a business owner have for using a number of different depreciation methods if the business property is owned for a long time?
  2. If business property is not claimed under the equipment-expensing deduction for the full cost of the item, what method of depreciation will the IRS require?
  3. Some assets are not eligible for MACRS depreciation. Give an example of some and explain why these items are not eligible.
  4. If an asset is not used exclusively for business purposes, how is the depreciation handled?

  Include the date in your answers.

  

  © Copyright 2000 Addison Wesley Longman, Inc.