Potomac LLC purchased an automobile for $30,000 on August 5,2017.What is Potomac's depreciation expense for 2017 (ignore any possible bonus depreciation)? Exhibit 10-8 in the text
A) $3,160
B) $4,287
C) $6,000
D) $30,000
E) None of the choices are correct.

Question

Potomac LLC purchased an automobile for $30,000 on August 5,2017.What is Potomac's depreciation expense for 2017 (ignore any possible bonus depreciation)?  Exhibit 10-8 in the text
A) $3,160
B) $4,287
C) $6,000
D) $30,000
E) None of the choices are correct.

Quizplus · Accepted Answer

The depreciation expense for 2017 is calculated using the MACRS 5-year property table for automobiles. For the first year, the rate is 20%, but since the car was purchased in August, the half-year convention applies, resulting in a 10% depreciation rate. Therefore, $30,000 * 10% = $3,000. However, the maximum depreciation limit for cars in 2017 is $3,160, so the expense is $3,160.

Potomac LLC Purchased an Automobile for $30,000 on August 5,2017