The LeMond Corporation just purchased a new production line. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes. A. LeMond's tax liability for the year will be lower. B. LeMond's taxable income will be lower. C. LeMond's net fixed assets as shown on the balance sheet will be higher at the end of the year. D. LeMond's cash position will improve (increase). E. LeMond's reported net income after taxes for the year will be lower.

The LeMond Corporation just purchased a new production line. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes. A. LeMond's tax liability for the year will be lower. B. LeMond's taxable income will be lower. C. LeMond's net fixed assets as shown on the balance sheet will be higher at the end of the year. D. LeMond's cash position will improve (increase). E. LeMond's reported net income after taxes for the year will be lower.

SWFT Comprehensive Volume 2019

42nd Edition

ISBN:9780357233306

Author:Maloney

Publisher:Maloney

Chapter17: Corporations: Introduction And Operating Rules

Section: Chapter Questions

Problem 16DQ

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The LeMond Corporation just purchased a new production line. Assume that the firm planned to depreciate the equipment over 5 years on a straight-line basis, but Congress then passed a provision that requires the company to depreciate the equipment on a straight-line basis over 7 years. Other things held constant, which of the following will occur as a result of this Congressional action? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes. LeMond's taxable income will be lower. LeMond's cash position will decrease. LeMond's tax liability for the year will be lower. LeMond's reported net income after taxes for the year will be lower. LeMond's net fixed assets as shown on the balance sheet will be lower at the end of the year.
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