Which of the following is/are true about the MACRS?
I. MACRS does not use economic life of an asset while calculating depreciation.
II. Under the MACRS system, the depreciation expense is larger in the early years, leading to lower taxes.
III. Depreciation under MACRS must be calculated using the accelerated depreciation method.
Click on the arrows to vote for the correct answer
A. B. C. D. E. F.F
MACRS classifies assets into several classes based on a pre-determined length of time called the "recovery period." The recovery period, while positively correlated with actual economic life, does not track the economic lives of individual assets precisely. In particular, recovery periods are shorter than actual economic lives, leading to higher depreciation expenses and lower taxes. For long-recovery period classes (>27 years), straight-line depreciation must be used while accelerated methods may be used for shorter life assets.