Reference no: EM131628161

Question: With the Luck of the Irish, May All of Your Plants Stay Green." So reads the slogan of O'Brien Nursery, a family-owned nursery business located in west-central Illinois. Started as a small greenhouse, the business has evolved into a full-scale nursery, including landscape services. The primary assets of the business include the following: 54 acres of land including a 4-acre active vineyard of grape vines; 4 trucks, 2 vans, and 4 tractors; a greenhouse, a storage building, a building housing the retail space and offices; and office equipment. Because of substantial residential growth in the area, there is more demand than ever for landscaping services and nursery stock. One of the hottest selling items has been small ornamental trees, which are typically priced from $40 to $200 each. To meet this demand, the nursery is considering the purchase of additional land and a state-of-the-art tree planter, which sells for $17,500.

1. Using the MACRS classification guide, determine the property classification for all of the current assets owned by the nursery

2. After one of the cargo vans breaks down, Mike O'Brien decides to convert his personal family van, purchased two years ago, to a business vehicle by having some paint detailing done. The original cost of the van was $21,400, and the custom painting cost $350. What portion of the cost of the van and/or painting would be eligible for a current year IRS section 179 deduction?

3. Create a depreciation schedule for the tree planter costing $17,500 using the MACRS method of depreciation as a 7-year property, and placed in service at midyear.

4. The tree planter is expected to plant 92,000 trees during its useful life. If the salvage value is $1,500, find the unit depreciation and depreciation for planting 8,700 trees in a year. Would this be a better depreciation method than the MACRS? Why or why not?