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:

Unearned Interest

Interest that has been collected on a loan by the lender but not yet earned, often because the loan may be paid off early.

Estimated Property Taxes

An approximation of the property taxes due on real estate, often used for budgeting or accounting purposes before the actual tax bill is received.

Modified Cash Basis

An accounting method that combines elements of both accrual and cash basis accounting, recording some transactions on an accrual basis and others on a cash basis.