Potomac LLC purchased an automobile for $30,000 on August 5, 2014. What is Potomac's depreciation expense for 2014 (ignore any possible bonus depreciation)?
A) $3,160
B) $4,287
C) $6,000
D) $30,000
E) None of these

Question

Quizplus · Accepted Answer

The depreciation expense for 2014 is calculated using the MACRS 5-year property half-year convention. The first-year depreciation rate is 20%, so $30,000 * 20% = $6,000. However, due to the half-year convention, only half of this amount is deductible in the first year, resulting in $3,000. Additionally, the luxury auto limit for 2014 is $3,160, which is the maximum allowable depreciation.

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