Many Companies Use MACRS (Modified Accelerated Cost Recovery System) Depreciation

question 3

Multiple Choice

Many companies use MACRS (Modified Accelerated Cost Recovery System) depreciation for

• A) financial reporting purposes and a different method for tax purposes.
• B) financial reporting purposes because depreciation is not allowed for tax purposes.
• C) tax purposes because it results in a larger net income in the early years of a plant asset's life
• D) tax purposes because of a desire to report higher expenses in early years in order to pay lower taxes.

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Definitions:

Functional Currency

The main currency used by a business or unit within a business to conduct its day-to-day transactions.

Exchange Rates

The worth of one currency when converting it into another.

Inventory

The total amount of goods and materials held by a company intended for sale or production.

Functional Currency

The primary currency used by a business or entity in its day-to-day operations and financial reporting.