question archive Dennis Harding is considering acquiring a new automobile that he will use 100% for business
Dennis Harding is considering acquiring a new automobile that he will use 100% for business
Subject:AccountingPrice:2.84 Bought7
Dennis Harding is considering acquiring a new automobile that he will use 100% for business. The purchase price of the automobile would be $64,500. If Dennis leased the car for five years, the lease payments would be $875 per month. Dennis will acquire the car on January 1, 2020. The inclusion dollar amounts from the IRS table for the next five years are $63, $140, $208, $251, and $289.
Dennis wants to know the effect on his adjusted gross income of purchasing versus leasing the car for the next five years. He does not claim any available additional first-year depreciation.
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Purchase: cost recovery deductions:
Total Cost recovery reduction = $60,784.8
If leased:
Lease Payments ($875 * 60) = $52,500
Inclusion dollar amount = $63 + $140 + $208 + $251 + $289 = $951
see computation below
Step-by-step explanation
Purchase: cost recovery deductions:
| Year | Cost | 5 year | Cost Recovery |
| 2020 | $64,500 | 20% | $12,900 |
| 2021 | $64,500 | 32% | $20,640 |
| 2022 | $64,500 | 19.2% | $12,384 |
| 2023 | $64,500 | 11.52% | $7,430.4 |
| 2024 | $64,500 | 11.52% | $7,430.4 |
| Total Cost recovery reduction | $60,784.8 |
If leased:
Lease Payments ($875 * 60) = $52,500
Inclusion dollar amount = $63 + $140 + $208 + $251 + $289 = $951
