Which of the following statements are FALSE? a. MACRS is the only depreciation method approved by the IRS for computing income-tax liability and it is also the most commonly used method in the United States for financial reporting. b. MACRS stands for Modified Annuitized Cost Recovery System. c. MACRS-GDS is based on double declining balance switching to straightline depreciation. d. MACRS-ADS is based on straight-line depreciation.

Requirement Complete the following table by indicating: 1. The section of the income statement where the item should be included (e.g., operating, non-operating, discontinued operations), and 2. Whether the event is reported net of tax. The first event is completed as a guide. Event Loss on disposal of equipment Gain on sale of plant assets Impairment loss Loss on inventory write-off after government prohibition Operating income Unrealized loss on available-for-sale investments Gain on disposal of expropriated land Unrealized gain on trading securities Operating income of discontinued division Loss on inventory write-off due to obsolescence Income Statement Classification Non-operating Reported Net of Tax? No

It is legal for a company to use one method of depreciation for tax reporting purposes and a different method for financial reporting purposes. This statement is true or false

When an independent valuation expert advises an entity that the salvage value of its plant and machinery had drastically changed and thus the change is material, the entity should (a) Retrospectively change the depreciation charge based on the revised salvage value. (b) Change the depreciation charge and treat it as a correction of an error. (c) Change the annual depreciation for the current year and future years. (d) Ignore the effect of the change on annual depreciation, because changes in salvage values would normally affect the future only since these are expected to be recovered in future.