Ethan's Eggroll House, a calendar year corporation, purchased a new computer and printer in January for $1,500. In February, the business purchased a new oven for $1,200. No other assets were purchased during the year. How much depreciation will be taken on these items in the current year if the taxpayer does NOT elect to use Section 179 and does NOT use bonus depreciation?

A. $300 computer; $171 oven
B. $525 computer; $300 oven
C. $375 computer; $300 oven
D. $300 computer; $240 oven
E. $525 computer; $420 oven
F. $214 computer; $171 oven

The depreciation for the computer and printer is $300 per year and for the oven is $171 per year. This calculation is based on the Straight-Line Depreciation Method. The correct answer is (A) $300 computer; $171 oven.

Explanation:

To answer this question, we need to understand that the IRS sets a different rate for different types of tangible business property that can be depreciated over time. The computer and printer are typically classified as 'Information Systems' which have a depreciable life of 5 years. The oven is classified as 'Restaurant Equipment' which has a depreciable life of 7 years.

To calculate annual depreciation, we use straight-line depreciation, wherein the value of an asset is reduced uniformly over its predetermined life. For the computer and printer, the annual depreciation would be $1500 / 5 years = $300. For the oven, the annual depreciation would be $1200 / 7 years = $171.43 (round up to $172).

Therefore, the correct answer would be $300 depreciation for the computer and printer and $171 for the oven, making the correct answer (A).

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