Which of the following is included in the calculation of the depreciation expense?

The calculation of depreciation expense is primarily based on the historical cost of an asset. Historical cost refers to the original purchase price of the asset, including all costs necessary to bring the asset to its usable condition and location, such as transportation and installation costs. This initial valuation is crucial because depreciation follows the principle of allocating the cost of an asset over its useful life, reflecting the asset's consumption and wear over time.

In accounting, depreciation methods such as straight-line or declining balance use this historical cost to determine how much of that cost should be recorded as an expense on the income statement for a given period. This practice ensures that expenses match revenue generated from the use of the asset, adhering to the matching principle in accounting.

Future cash flows, current market value, and financing expenses do not factor into the depreciation calculation. Future cash flows relate to expected profits from the asset but do not impact cost allocation. Current market value reflects how much an asset could sell for today, which is not relevant for recording depreciation based on historical costs. Financing expenses pertain to costs associated with borrowing or finance but are separate from asset valuation and depreciation calculations.