What Is the Maximum Depreciation Expense Deduction for Year 2

question 67

Multiple Choice

What is the maximum depreciation expense deduction for Year 2 (2016) for a passenger automobile, used 100 percent for qualified business use, placed in service on June 15, 2015 and costing $16,000 (the election to expense is not made and no bonus depreciation was taken) ?

• A)$2,800
• B)$3,160
• C)$3,200
• D)$5,100
• E)$5,120

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Definitions:

Indirect Method

A method of preparing the cash flow statement where net income is adjusted for changes in balance sheet accounts to calculate cash from operating activities.

Net Income

Represents the total earnings of a company after subtracting all expenses, taxes, and costs from its total revenue.

Accounts Receivable

Debts owed by customers to a corporation for goods or services that have been delivered but remain unpaid.

Indirect Method

A technique used in cash flow statement preparation that adjusts net income for changes in non-cash accounts to calculate operating cash flow.