Multiple Choice
In depreciation accounting, which pair correctly identifies the two types of physical depreciation?
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8. Long Lived Assets
Depreciation: Summary of Main Methods
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Which of the following depreciation conventions is NOT used under the Modified Accelerated Cost Recovery System (MACRS)?
A
Full-month convention
B
Mid-quarter convention
C
Mid-month convention
D
Half-year convention
Verified step by step guidance1
Understand the Modified Accelerated Cost Recovery System (MACRS): MACRS is a method of depreciation used in the United States for tax purposes. It allows businesses to recover the cost of certain assets over a specified life span using accelerated depreciation methods.
Review the depreciation conventions under MACRS: MACRS uses specific conventions to determine when depreciation begins and ends during the year. These conventions include the half-year convention, mid-quarter convention, and mid-month convention.
Clarify the half-year convention: This assumes that all assets placed in service or disposed of during the year are treated as if they were placed in service or disposed of at the midpoint of the year.
Clarify the mid-quarter convention: This applies if more than 40% of the total depreciable property is placed in service during the last three months of the tax year. It divides the year into quarters and assumes assets are placed in service at the midpoint of the quarter.
Identify the convention NOT used under MACRS: The full-month convention is not part of MACRS. This convention assumes assets are placed in service or disposed of at the beginning of a specific month, but it is not used under MACRS.
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