A financial analyst is studying the income statement eff ect of two alternative depreciationmethods for a recently acquired piece of equipment. She gathers the following information about the equipment’s expected production life and use:Year 1 Year 2 Year 3 Year 4 Year 5 TotalUnits of production 2,000 2,000 2,000 2,000 2,500 10,500Compared with the units-of-production method of depreciation, if the company uses thestraight-line method to depreciate the equipment, its net income in Year 1 will most likely be:A. lower.B. higher.C. the same
A financial analyst is studying the income statement eff ect of two alternative depreciationmethods for a recently acquired piece of equipment. She gathers the following information about the equipment’s expected production life and use:Year 1 Year 2 Year 3 Year 4 Year 5 TotalUnits of production 2,000 2,000 2,000 2,000 2,500 10,500Compared with the units-of-production method of depreciation, if the company uses thestraight-line method to depreciate the equipment, its net income in Year 1 will most likely be:A. lower.B. higher.C. the same
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A financial analyst is studying the income statement eff ect of two alternative
methods for a recently acquired piece of equipment. She gathers the following information about the equipment’s expected production life and use:
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Units of production 2,000 2,000 2,000 2,000 2,500 10,500
Compared with the units-of-production method of depreciation, if the company uses the
straight-line method to depreciate the equipment, its net income in Year 1 will most likely be:
A. lower.
B. higher.
C. the same
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