Question

Which of the statements below is FALSE?

Under the modified accelerated cost recovery system (MACRS) system of depreciation, once the assigned class life is established, an adjustable percentage of the cost is expensed each year as depreciation.

Under the modified accelerated cost recovery system (MACRS) system of depreciation, the government classifies all assets into groups that are assigned specific "lives" for the purpose of depreciation.

Depreciation or "expired" costs each year do not reflect cash flows because the actual purchase and installation (outflow of dollars) of the machines have already taken place.

Answer 1

The incorrect statement is

Under the MACRS System of depreciation, bonds the assigned class life is established, an adjustable percentage of the cost is expensed each year as depreciation

The % is not adjustable rather specific which is expensed each year

Depreciation is a non cash expense and hence, does not represent outflow