Verified Answer

Modified Accelerated Cost Recovery System (MACRS) is the method used for charging depreciation in Country U. In this method, the assets are divided under different classes based on the periods set by the Internal Revenue Services of Country U. Also, the depreciation is charged at a higher rate under this system as compared to the straight-line method of depreciation.
 
MACRS depreciation classifies the assets in seven categories. This categorization is made on the basis of the number of years over which the assets would be depreciated. The first one is the 3-year class that provides depreciation rates for special manufacturing goods. Computers, automobiles, light-duty trucks are included in the 5-year depreciation class. The 7- year class has heavy industrial equipment and assets like furniture and fittings. The assets that have longer lives than 7 years and upto 10 years are mentioned under 10-year class. Residential real estate properties are categorised under 27.5-year class whereas non residential and commercial properties like industry buildings are classified as 39-year class.