On January 1, year 1, Charleston Co. purchased machinery at a cost of $150,000. Book depreciation was calculated using the double-declining balance method over an estimated useful life of 10 years. The company recognized a full year of depreciation in the year of acquisition. Based on a year 3 engineering study, the estimated useful life of the machinery was changed from 10 to 15 years, effective January 1, year 4, and the depreciation method was changed to the straight-line method with no salvage value.

Determine the book value of Charleston's machinery at December 31, year 3, by entering the appropriate values in the shaded cells below. Enter all amounts as positive values.

Original cost of machinery	$150,000
Depreciation expense
Year 1
Year 2
Year 3
Book value as of December 31, year 3

Miller, Smith and Tucker decided to form a partnership to perform engineering services. The new entity, MST Consulting Services, LLP, began operations on January 1, year 1, and uses the calendar year for reporting purposes. The partners expect to work full time for MST, and each contributed cash and other property to the partnership sufficient to commence operations. The table below indicates each partner's basis in the partnership interest and MST's basis in the non-cash contributed property as of January 1, year 1.

Partner	Partner's basis in partnership interest	Partner's non-cash property contributed	MST's basis in non-cash property contributed
Miller	$25,000	Office furniture	$10,000
Smith	$25,000	Pickup truck used 100% for business purposes	$15,000
Tucker	$25,000	Computers and printers	$5,000

Use the MACRS table in the exhibits and the data in the table above to calculate the partnership's Year 1 depreciation expense. Enter the appropriate amounts in the shaded cells in the table below. Assume that none of the original cost of any asset was expensed by the partnership under the provisions of Section 179, and that the partnership elected not to claim first-year bonus depreciation on any asset.

Asset	Year 1 depreciation expense
Office furniture
Pickup truck
Computers and printers

Sabre Consulting Group, LLP, is a limited liability partnership for tax purposes. The following information is available about Sabre's year 1 finances:

Ordinary income from other partnerships	$5,200
Net gain (loss) from Form 4797	2,400
Consulting fees earned	120,000

Complete the income section of the year 1 IRS Form 1065 U.S Return of Partnership Income, by entering the required information in the shaded areas below.

Form 1065 Department of the Treasury Internal Revenue Service		US. Return of Partnership income For calendar year 1 or tax year beginning......., year 1, and ending....., year..... ◊ See separate instructions.						OMB No. 1545-0099
	YEAR 1
A Principal business activity Product Assembly		Use the IRS label. Other- wise print or type.	Name of partnership Sabre Consulting, LLP					D Employer identification number XX-XXXXXXX
B Principal product or service Widgets			Number, street, and room or suite no. (If a P.O. box, see page 14 of instructions.) 1210 Industry Blvd					E Date business started 1/1/Year 1
C Business code number XXXXXXX			City or town, state, and ZIP code New York, NY 10011					F Total assets (see page 14 of the instructions) $       40,000
G Check applicable boxes: (1) X Initial return (2) O Final return (3) O Name change (4) O Address change (5) O Amended return H Check accounting method: (1) O Cash (2) X Accrual (3) O Other(specify) ................................................................................................... I Number of Schedules K-1 Attach one for each person who was a partner at any time during the tax year: ...................................................................................................
Caution: Include only trade or business income and expenses on lines 1a through 22 below. See the instructions for more information.
	1a Gross receipts or sales......................................................................................   b Less returns and allowances.............................................................................			1a
				1b			1c		{{oneC = +oneA - +oneB}}
	2 Cost of goods sold (Schedule A, line 8)...................................................................................... 3 Gross profit. Subtract line 2 from line 1c...................................................................................... 4 Ordinary income (loss) from other partnerships, estates, and trusts (attach schedule)................... 5 Net farm profit (loss) (attach Schedule F (form 1040)) ........................................................................ 6 Net gain (loss) from Form 4797, Part II, line 18................................................................................. 7 Other income (loss) (attach schedule) .............................................................................................. 8 Total income (loss). Combine lines 3 through 7................................................................						2
							3		{{box3= +oneC - +box2 }}
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							8		{{+box3 + +box4 + +box5 + +box6 + +box7}}