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Two years ago, Bethesda Corporation bought a delivery truck for $30,000 (not subject to the luxury auto depreciation limits). Bethesda used MACRS 200 percent declining balance and the half-year convention to recover the cost of the truck, but it did not elect §179 expensing and opted out of bonus depreciation. Answer the questions for the following alternative scenarios. Use MACRS Table. (Do not round percentages used for calculations. Loss amounts should be indicated by a minus sign. Leave no answer blank. Enter zero if applicable.)
Required:
Assume that Bethesda claimed $18,500 of depreciation expense on the truck before it sold it in year 3. What are the amount and character of the gain or loss if Bethesda sold the truck in year 3 for $35,000 and incurred $3,000 of selling expenses on the sale?
Table 1 MACRS Half-Year Convention
Depreciation Rate for Recovery Period
3-Year
5-Year
7-Year
10-Year
15-Year
20-Year
Year 1
33.33%
20.00%
14.29%
10.00%
5.00%
3.750%
Year 2
44.45
32.00
24.49
18.00
9.50
7.219
Year 3
14.81
19.20
17.49
14.40
8.55
6.677
Year 4
7.41
11.52
12.49
7.70
6.177
Year 5
8.93
9.22
6.93
5.713
Year 6
5.76
8.92
7.37
6.23
5.285
Year 7
6.55
5.90
4.888
Year 8
4.46
4.522
Year 9
6.56
5.91
4.462
Year 10
4.461
Year 11
3.28
Year 12
Year 13
Year 14
Year 15
Year 16
2.95
Year 17
Year 18
Year 19
Year 20
Year 21
2.231
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