(4 points) In replacement analysis, an increase in depreciation expense due to purchase of a new asset will: 1) represent a cash inflow due to increased tax liability 2) represent a cash outflow due to increased tax liability 3) represent a cash inflow due to reduced tax liability 4) have no effect on cash, but increase taxes Previous Page Next Page Page 18 of 23

Q: Discuss the difference between the straight-line method of depreciation and the accelerated methods.…

A: The key difference between straight-line method and the accelerated method is that, under…

Q: The primary advantage to using accelerated rather than straight-line depreciation is that with…

A: Accelerated depreciation is a method of depreciation in which an asset is expensed at a faster rate…

Q: Relevant cash inflows and outflows in a discounted cash flow analysis are the differences in…

A: True

Q: Depreciation Inflation Taxation

A: Definition of each of these financial terms along with an example each are provided below:

Q: 8) Which of the following is a key rule for analysing indivisible one-period capital rationing…

A: The primary goal of financial managers is to maximize shareholder wealth. A corporation will…

Q: The ff data were made available from a single entry set of books of PETRA Trading owned by Petra…

A: In a single entry system to compute the gross sales and net incomes the following work is needed to…

Q: Explain what effect will an upward asset revaluation have on subsequent periods’ profits

A: The revaluation of assets means the change in the value of assets over a period of time this made…

Q: What are the Effects of Inflation on Projects with Depreciable Assets?

A: Answer: A depreciable asset is nothing a property that gives more economic benefit over a tax period…

Q: Utilizing bonus depreciation will result in an increase in after-tax present worth. a. True b. False

A: Depreciation means decline in the estimation of benefit inside its valuable life because of mileage…

Q: Which of these statements about depreciation is true? a. MACRS depreciation incorporates only…

A: Depreciation is an accounting method used to allocate the cost of tangible assets, such as…

Q: “Depreciation expenses have no effect on cash flows and, therefore, are not relevant in…

A: Depreciation expenses have no effect on cash flows and, therefore, are not relevant in…

Q: The amount of taxes generated is incorrect...

A: Section 1245 assets comprise personal property used in trade or business and held for over 12…

Q: In full accrual accounting, revenue for the period is determined first, and then costs are MATCHED…

A: The street branch is accountable for preserving, repairing, and building roads. These activities…

Q: For each statement in parts a to d, give a short answer or indicate True orFalse. a. Which of the…

A: Cash flows are the cash receipts and the payment the organization receives the given period of time.…

Q: 1.Which depreciation method should a firm choose if it wants to minimize its tax liabilities? a.…

A: Because of use, wear and tear, or obsolescence, the monetary value of an asset will depreciate over…

Q: Case C In your opinion, would the following factors tend to favor borrowing or leasing as a…

A: Borrowing or leasing is a finance alternative wherein assets can be used in the business without…

Q: Adjusted present value technique is a technique that A) adjusts conventional present value for…

A: Adjusted present value technique is very common method used in the valuation of stock and companies…

Q: Many companies use an accelerated depreciation method because: A. It is required by the tax code. B.…

A: Depreciation is the allocation of cost of asset over the useful life of the asset.

Q: Distinguish different categories of cash flows to be considered in an equipment-replacement decision…

A:

Q: Assuming that there are no income taxes, which of the following is correct concerning depreciation?…

A: Depreciation is reduction in value of asset due to wear and tear of asset with the passage of time…

Q: Match the concept that closely describes a particular depreciation method. Choose the correct answer…

A: Lets understand the basics. Double declining balance method is a accelerated depreciation method…

Q: The gross income multiplier (GIM) is a great method to value small scale and simple commercial…

A: GIM method is an approximate and rough method of valuation of the property based on the income from…

Q: If you paid miscellaneous expenses does it decrease cash asset?

A: Miscellaneous expenses are those expenses which are usually group of small amounts from small…

Q: The use of accelerated depreciation for tax purposes and straight-line depreciation for accounting…

A: Solution: The use of accelerated depreciation for tax purposes and straight line depreciation for…

Q: What is depreciation and amortization? What's the difference? It is an accounting concept that has…

A: Depreciation is a charge to account for a reduction in the value of a capital asset arising because…

Q: Why aren't they fully expensed at the time they are purchased?

A: Assets : - Assets are classified into two types.  1. Fixed assets  2. Current assets Depending on…

Q: f a company is seeking to minimize its income tax expense, the depreciation method it would most…

A: Each company have choice to choose method of depreciation and depreciation method used must be based…

Q: Joe Smith has owned and operated Smith's Tool and Die for 40 years.  Currently, he is only making…

A: Calculate profit or loss on the sale of assets of the business as follows: Calculate…

Q: Depreciation is the reduction in the usable value of fixed assets due to normal wear and tear of…

A: Normal depreciation: It refers to the reduction in the value of an asset over a period of time due…

Q: Depreciation is not considered in the computation of the payback period

A: Payback period is the time required to recover the initial investment. It is computed by dividing…

Q: Just for clarification purposes, is the 50 000 a sunken cost and should it have been accounted for…

A: Sunk cost - is a  cost that has already been incurred. Such cost cannot be recovered.

Q: A company can either purchase or lease an asset. When comparing the two alternatives, which of the…

A: When a manufacturing company finances and buys the assets for the production purpose. A company can…

Q: A company acquired a new machine and immediately deducted the entire cost on its current income tax…

A: Deprecation is an accounting system used to allocate the cost of a palpable asset over its useful…

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.