Oregon Construction Contractors (CCB) Practice Test

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What does MACRS stand for in construction contracting?

Modified Average Cost Recovery System
Multi Accelerated Cost Reduction System
Modified Accelerated Cost Recovery System
Maximum Allowable Cost Recovery System

The correct answer is: Modified Accelerated Cost Recovery System

MACRS stands for Modified Accelerated Cost Recovery System. This is a method that allows for the depreciation of assets over a specified period. In construction contracting, MACRS is commonly used for calculating the depreciation of property, plant, and equipment, which is essential for financial accounting and tax purposes. The "modified" aspect refers to specific adjustments made to the regular accelerated depreciation schedules established in the tax code, allowing contractors to recover their costs more quickly. This system provides a significant tax advantage by allowing businesses to deduct larger portions of their capital expenditures in the early years of an asset's life, thus improving cash flow. Understanding MACRS is critical for contractors, as it can influence pricing strategies, bidding, and long-term financial planning in the construction industry.