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Chapter 11: Q11-29Q (page 583)

What is a modified accelerated cost recovery system (MACRS)? Speculate as to why this system is now required for tax purposes.

Short Answer

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Answer

MACRS was adopted to permit a faster write-off of tangible assets to provide additional tax incentives and simplify depreciation.

Step by step solution

01

Step-by-Step SolutionStep 1: Meaning of MACRS

MACRS system eliminates the requirement to calculate the estimated usable life of each asset. Under MACRS, choosing a depreciation method and a salvage value is optional. It applies to depreciable assets purchased after 1987.

02

Explaining MARCS required for tax purposes.

The recovery deduction for an asset is calculated by adding a statutory percentage to the property's historical cost. MACRS was created to provide a faster write-off of tangible assets, increasing benefits and simplifying depreciation, a faster write-off of tangible assets, agreements about estimated usable life, salvage value, and other issues.

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Most popular questions from this chapter

Explain how gains or losses on impaired assets should be reported in income.

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