acc421dq4 - Chapter 8 1. The terms depreciation and cost...

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Chapter 8 1. The terms depreciation and cost recovery are both forms of a deduction for the consumption of the cost of an asset. These concepts are based on the premise that the asset acquired or improvement made benefits more than one accounting period; otherwise the expenditure is deducted in the year incurred. The IRS used depreciation system for property placed in service prior to 1/1/1981. Accelerated Cost Recovery System is used for property placed in service after 12/31/1980 until 1/1/1987. Modified Accelerated Cost Recovery System is used for property placed in service after 12/31/1986 until present. 4. Henry would need to look at determining the amount of cost recovery under MACRS. The recovery period for non-residential real-estate is 39 years. Henry allocated two million of the ten million to the cost of constructing mountain roads, slopes, and trails. He also spent an additional One million for maintaining the improvements. The tem million spent should be allocated over the required 39-year period using the straight-line method for non-residential real estate. The
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This note was uploaded on 10/16/2011 for the course ACCOUNTING 421 taught by Professor ?? during the Spring '10 term at Thomas Edison State.

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acc421dq4 - Chapter 8 1. The terms depreciation and cost...

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