Certified Energy Manager Practice Exam

Disable ads (and more) with a membership for a one time $2.99 payment

Prepare for the Certified Energy Manager Exam with our comprehensive study materials. Access flashcards, multiple choice questions, and detailed explanations to ensure you ace your exam.

Each practice test/flash card set has 50 randomly selected questions from a bank of over 500. You'll get a new set of questions each time!

Practice this question and more.

Which method is used for calculating depreciation under current accounting practices?

SLM - Straight-Line Method
MACRS - Modified Accelerated Cost Recovery System
Declining Balance Method
Hourly Rate Method

The correct answer is: MACRS - Modified Accelerated Cost Recovery System

The Modified Accelerated Cost Recovery System (MACRS) is widely used in current accounting practices for calculating depreciation, particularly for tax purposes. This method allows for a more accelerated write-off of asset costs over specific recovery periods based on the asset class. By allowing larger depreciation deductions in the earlier years of an asset's life, MACRS can help businesses improve their cash flow and reduce taxable income more rapidly in the initial years of acquisition. MACRS specifies predetermined life spans for various types of assets and applies a specific depreciation rate that results in a greater expense in the early years, which aligns with how many physical assets actually depreciate in value. This approach contrasts with methods like the Straight-Line Method, which spreads the cost evenly over the asset's lifespan, or other non-standard methods that may not be as widely accepted under current accounting standards. In summary, the choice of MACRS highlights its relevance for tax reporting and cash management, emphasizing its role within current accounting practices.