Question

Which of the following is not true about depreciation?

a. Depreciation is not a cash flow.
b. To be depreciable, an asset must have a life longer than one year.
c. A 5-year property will generate a regular MACRS-GDS depreciation deductions in six fiscal years.
d. For MACRS-GDS an estimate of the salvage values is required.

Answer 1

D) For MACRS-GDS an estimate of the salvage value is required.

This statement is not true about depreciation

Step-by-step explanation:

The term Depreciation refers to the decrease in the value of an asset over time. It is not a part of cash flow and does not involve any cash. To calculate the depreciation of an asset, it must have a life of more than one year.

According to this system, the depreciation occurs one year higher than the classified period, for example, a 5-year property will depreciate in 6 years. The aspect which is not considered while calculating the depreciation under MACRS-GDS is the salvage value of the property because it depreciates to zero and the rates sum-up to 100%.

Therefore, alternative D is not true about depreciation in MACRS-GDS.