Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Depreciation: Straight Line

Financial Accounting

8. Long Lived Assets

Depreciation: Straight Line

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Multiple Choice

When depreciating real property under MACRS, the recovery rates are based on the ______ method.

double declining balance

sum-of-the-years'-digits

straight-line

units of production

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Verified step by step guidance

Understand the context: The Modified Accelerated Cost Recovery System (MACRS) is a method of depreciation used in the United States for tax purposes. It allows for accelerated depreciation of assets, but for real property, a specific method is used.

Identify the key term: Real property under MACRS refers to assets like buildings or land improvements, which are depreciated over a longer recovery period compared to personal property.

Recall the depreciation methods: The options provided include double declining balance, sum-of-the-years'-digits, straight-line, and units of production. Each method calculates depreciation differently.

Focus on the correct method: Under MACRS, real property (such as residential and non-residential buildings) is depreciated using the straight-line method over a specified recovery period (e.g., 27.5 years for residential property and 39 years for non-residential property).

Conclude: The straight-line method is used for real property under MACRS because it allocates an equal amount of depreciation expense each year over the asset's useful life, as required by tax regulations for this type of property.