Discuss IMANET CMA Exam Topic 2 Question 52

The tax impact of equipment depreciation affects capital budgeting decisions. Currently, me Modified Accelerated Cost Recover' System (MACRS) is used as the depreciation method for most assets for tax purposes. When employing the MACRS method of depreciation in a capita) budgeting decision, the use of MACRS as compared with the straight-line method of depreciation will result in?

AEqual total depreciation for both methods.

BMACRS producing less total depreciation than straight line.

CEqual total tax payments, after discounting for the time value of money.

DMACRS producing more total depreciation than straight line

Suggested Answer: A

For tax purposes. straight-line depreciation is an alternative to the MACRS method. Both methods will result in the same total depreciation over the life of the asset: however, MACRS will result in greater depreciation in the early years of the assets life because it is an accelerated method. Given that MACRS results in larger depreciation deductions in the earj years, taxes will be lower in the early years and higher in the later years. Because the incremental benefits will be discounted over a shorter period than the incremental depreciation costs. 'MACRS is preferable to the straight-line method,

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11 comments · newest first

Monte 11 months ago

Nope, MACRS definitely produces more total depreciation!

Vivan 11 months ago

I think both methods end up with the same total depreciation.

Skye 12 months ago

Wait, are we sure about that? Seems odd.

Cristen 12 months ago

Totally agree, straight-line is way slower.

Gary 12 months ago

MACRS gives you more depreciation upfront!

Yuki 1 year ago

I recall that MACRS can lead to lower tax payments in the early years due to higher depreciation. So, I think it’s more than straight-line, which makes me lean towards D as well.

Margarita 1 year ago

I practiced a similar question where MACRS resulted in higher depreciation early on, which impacts tax payments. I feel like D is definitely the right choice here.

Julie 1 year ago

I'm not entirely sure, but I think both methods will eventually lead to the same total depreciation over the asset's life. Maybe A is the answer?

Maryln 1 year ago

I remember studying that MACRS allows for accelerated depreciation, which usually means more depreciation in the early years compared to straight-line. So, I think D might be correct.

Frankie 1 year ago

Okay, I've got this. Risk management is the process of identifying, analyzing, and responding to potential risks. That's the best fit for the description given in the question.

Emily 1 year ago

I'm a bit confused on this question. TOGAF covers a lot of ground, so I'm not sure which specific reference material it provides for establishing an architecture function. I'll have to review my notes to see if I can narrow this down.

IMANET CMA Exam - Topic 2 Question 52 Discussion