Use the Following Information for Questions 115 and 116

question 110

Multiple Choice

Use the following information for questions 115 and 116:
On January 1, 2014, Garrett Company purchased a machine costing $250,000. The machine is in the MACRS 5-year recovery class for tax purposes and has an estimated $50,000 salvage value at the end of its economic life.
-Assuming the company uses the optional straight-line method, the amount of MACRS deduction for tax purposes for the year 2014 is

• A) $40,000.
• B) $50,000.
• C) $20,000.
• D) $25,000.

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Definitions:

Solvency

The ability of an entity to meet its long-term financial commitments and obligations.

Restructuring

The process of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable or better organized for its present needs.

Divestiture

The action of a company selling or disposing of an asset or subsidiary as a strategic business decision.

Unrelated Diversification

A business strategy whereby a company expands into industries that are not related to its current line of business.