Final answer:
The MACRS method of depreciation is equivalent to applying the double-declining-balance (DDB) method. Both methods allow for accelerated depreciation, with larger deductions in the earlier years and smaller deductions in the later years. The DDB method is specifically used for assets with a recovery period of 3, 5, 7, or 10 years under MACRS.
Step-by-step explanation:
The Modified Accelerated Cost Recovery System (MACRS) is a method used for tax purposes to depreciate assets over their useful lives. It allows for larger deductions in the earlier years of an asset's life and smaller deductions in the later years. The double-declining-balance method (DDB) is a specific depreciation method under MACRS that allows for a faster depreciation rate initially and slower rate later on.
MACRS is equivalent to applying the DDB method because both methods allow for accelerated depreciation. Under MACRS, the DDB method is used for assets that have a recovery period of 3, 5, 7, or 10 years. This means that these assets will be depreciated at twice the straight-line rate in the first year, and the remaining depreciable basis will be depreciated using the straight-line method in subsequent years until the asset is fully depreciated.
For example, let's say you have a computer with a cost of $1,000 and a useful life of 5 years. Using the double-declining-balance method under MACRS, you would depreciate the computer at a rate of 40% per year. In the first year, you would deduct $400 ($1,000 x 40%). In the second year, you would deduct $240 ($600 x 40%). This continues until the asset is fully depreciated.