Question

When we use the method that uses both declining balance and straight line depreciation, we take depreciation at the beginning of the depreciable life using _______ and then switchover to _______ for the end of the depreciable life.

Declining balance method; straight line method

Straight line method; MACRS

Straight line method; declining balance method

Which method does the IRS use to allow companies to compute their tax liability concerning depreciation?

MACRS

Straight line depreciation

Units of production method

Declining balance depreciation

Which of the following is generally assumed when using MACRS, as it applies much more broadly in practice?

General Depreciation system (GDS)

Alternative Depreciation System (ADS)

Both are used equally

Answer 1

Q1- correct answer is Straight line method,MACRS

Q2- correct answer is MACRS(Modified Accelerated cost Recovery system) :- For financial statements IRS generally used Straight line method, Accelerated Depreciation method,Units of production dep.method.

For tax purposes the IRS generally requires to use of MACRS.It works similarly to Accelerated Depreciation.

MACRS allows the capitalised cost of an asset to be recovered over a specified period via annual deductions. It puts fixed assets into classes that have set deprecation period.

Q3- correct answer is GDS :- Business generally used the GDS unless they required to use the ADS. A general Depreciation system uses the declining balance method to depericiate personal property.

The ADS is a system the IRS requires to be used in special circumstances to calculate depreciation on certain business assets. ADS generally increases the number of years over which property is depereciated,thus decreasing the annual deductions.