Question

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

Answer 1

Potomac LLC's depreciation expense for 2014 is $5,000.

Step-by-step explanation:

To calculate Potomac LLC's depreciation expense for 2014, we need to know the useful life of the automobile and the depreciation method used. Assuming the useful life is 5 years and the straight-line depreciation method is used, we can calculate the annual depreciation expense as follows:

Depreciation Expense = (Cost of Automobile - Salvage Value) / Useful Life

Salvage Value is the estimated value of the automobile at the end of its useful life. Let's assume a salvage value of $5,000. Using the formula, we get:

Depreciation Expense = ($30,000 - $5,000) / 5 = $5,000

Therefore, Potomac LLC's depreciation expense for 2014 is $5,000. Option E, None of these, is the correct answer.