Certified Energy Manager Practice Exam

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Prepare for the Certified Energy Manager Exam. Use our flashcards and multiple-choice questions, each with detailed hints and explanations. Get ready for success!

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Which formula is used in the MACRS for depreciation calculation?

Asset cost multiplied by a fixed rate
Asset cost divided by useful life
Asset cost multiplied by declining percentages
Asset cost plus accumulated depreciation

The correct answer is: Asset cost multiplied by declining percentages

The correct choice involves the concept of Modified Accelerated Cost Recovery System (MACRS), which is a method used in the United States for tax depreciation of assets. Under MACRS, the depreciation of an asset is computed by applying declining percentages to the cost of the asset over a specified recovery period. This approach allows for a greater initial depreciation deduction in the early years of an asset's life, which can provide tax benefits to businesses and incentivize capital investment. The use of declining percentages means that as time goes on, the amount of depreciation claimed decreases, reflecting the diminishing value of the asset over time. This contrasts with the other methods that distribute depreciation more evenly or consider a fixed rate without accounting for the declining value aspect. In summary, the formula that utilizes asset cost multiplied by declining percentages inherently captures the essence of MACRS as a means to facilitate accelerated depreciation.