Which of the methods below is a way to allocate depreciation? A) The

Which of the methods below is a way to allocate depreciation?

A) The allocation each year is the amount of cost as determined by the actual estimated usage for that year.
B) Use the government-mandated accelerated depreciation system, which depreciates the capital asset at the minimum accelerated amount allowed each year.
C) The allocation each year is the same amount of cost as determined by the average expected operating cash inflow divided by the number of years of useful life of the machines.
D) Use the government-mandated accelerated depreciation system, which depreciates the capital asset at the maximum accelerated amount allowed each year.

ANSWER

Answer: D
Explanation: D) There are two common ways to allocate the depreciation through the years.
(1) Straight Line Depreciation–Each year is allocated the same amount of cost which is determined by the total initial cost less salvage value divided by the number of years of useful life of the machines.
(2) MACRS–MACRS is a government-mandated accelerated depreciation system that depreciates the capital asset at the maximum accelerated amount allowed each year. MACRS stands for modified accelerated cost recovery system and classifies the “life” of every asset for use in determining the depreciation cost for each year.