Final answer:
Option D, stating that 'useful life must be shorter than legal life,' is not a way in which MACRS differs from GAAP depreciation. MACRS assumes a zero salvage value, mandates estimated life by tax law, and accelerates cost recovery, while GAAP allows for salvage value estimates, flexible useful life determination, and uses different depreciation methods.
Step-by-step explanation:
The answer to the question of which option is not a way in which Modified Accelerated Cost Recovery System (MACRS) differs from Generally Accepted Accounting Principles (GAAP) depreciation is D. useful life must be shorter than legal life. MACRS and GAAP differ in the following ways:
A. assigned salvage value of zero: MACRS assumes a salvage value of zero, while GAAP allows for a salvage value to be estimated and accounted for in depreciation calculations.
B. estimated life is mandated by tax law: Under MACRS, the useful life of an asset is dictated by IRS regulations, whereas GAAP allows companies to determine the useful life based on their own estimates and usage patterns.
C. cost recovery is accelerated: MACRS typically provides for more rapid depreciation than GAAP, often resulting in higher expense recognition in the earlier years of an asset's life.
Option D does not represent a difference between MACRS and GAAP; in fact, under some circumstances, GAAP useful life estimates could be shorter than the tax life prescribed by MACRS.