A company bought two new computers in 2006 and elected to use the section 179 deduction on the corporate taxes. One was purchased in July 06 and the other December 29, 06. On the one purchased in July, depreciation entries were made each month. If the corporation uses the section 179 deduction for both of these computers, should an adjusting entry be made as of the end of the 2006 to accumulated depreciation for the balance of the cost, bringing it to zero? For the 2nd computer purchased at the end of December, should an entry be made for the full amount of the cost per the section 179 ded. Reducing it to zero? The total assets will be reduced due to using the section 179 deduction and taking the full deduction in 2006 for these two items. Is this correct?

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Originally Posted by BHolmes

A company bought two new computers in 2006 and elected to use the section 179 deduction on the corporate taxes. One was purchased in July 06 and the other December 29, 06. On the one purchased in July, depreciation entries were made each month. If the corporation uses the section 179 deduction for both of these computers, should an adjusting entry be made as of the end of the 2006 to accumulated depreciation for the balance of the cost, bringing it to zero? For the 2nd computer purchased at the end of December, should an entry be made for the full amount of the cost per the section 179 ded. reducing it to zero? The total assets will be reduced due to using the section 179 deduction and taking the full deduction in 2006 for these two items. Is this correct?

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My understanding is with a Section 179, you are deducting the entire cost of the product up front and therefore do not depreciate or amortize it.

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Originally Posted by BHolmes

A company bought two new computers in 2006 and elected to use the section 179 deduction on the corporate taxes. One was purchased in July 06 and the other December 29, 06. On the one purchased in July, depreciation entries were made each month. If the corporation uses the section 179 deduction for both of these computers, should an adjusting entry be made as of the end of the 2006 to accumulated depreciation for the balance of the cost, bringing it to zero? For the 2nd computer purchased at the end of December, should an entry be made for the full amount of the cost per the section 179 ded. reducing it to zero? The total assets will be reduced due to using the section 179 deduction and taking the full deduction in 2006 for these two items. Is this correct?

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This IRS link explains everything:

http://www.irs.gov/pub/irs-pdf/p946.pdf

Bholmes, please realize here that you are dealing with "two" sets of records here. You have book depreciation and tax depreciation and the difference between the two falls on the M-1 schedule on your tax return. Section 179 is only allowed for TAX purposes not for BOOK purposes. To answer your question, NO entry other than your normal monthly depreciation would be recorded on your books. Hope this helps.