A Company That Utilizes the MACRS System of Depreciation

question 101

Multiple Choice

A company that utilizes the MACRS system of depreciation:

• A)will have equal depreciation costs each year of an asset's life.
• B)will have a greater tax shield in year two of a project than it would have if the firm had opted for straight-line depreciation, given the same depreciation life.
• C)can depreciate the cost of land, if it so desires.
• D)will expense less than the entire cost of an asset.
• E)cannot expense any of the cost of a new asset during the first year of the asset's life.

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Definitions:

Credit Sales

Transactions where the customer purchases goods or services on credit, paying the supplier at a later date.

Perpetual Inventory Method

An inventory management system where adjustments to inventory accounts are made continuously as transactions occur.

Bank Credit Card

A payment card issued by a bank allowing cardholders to purchase goods and services on credit.

Income Statement Relationships

The relationships within an income statement involve how revenues, expenses, and profits interact and affect each other to show a company's financial performance over a period.