The primary advantage to using accelerated rather than straight-line depreciation is that with accelerated depreciation the totalamount of depreciation that can be taken, assuming the asset is used for its full tax life, is greater.A TrueFalse

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

Answered: The primary advantage to using…

CONCEPTS IN FED.TAX.,2020-W/ACCESS

20th Edition

ISBN:9780357110362

Author:Murphy

Publisher:Murphy

Chapter10: Cost Recovery On Property: Depreciation, Depletion, And Amortization

Section: Chapter Questions

Problem 9DQ

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Poston Company uses an accelerated depreciation method for tax purposes rather than straight-line depreciation for a new asset acquisition. Which of the following choices correctly shows when the majority of depreciation would be taken (early or late in the asset's life), when most of the tax savings occur (early or late in the asset's life), and which depreciation method would have the higher present value? When Majority of Depreciation is Taken When Majority of Tax Savings Occur Depreciation Method with Higher Present Value A. Early in life Early in life Accelerated B. Early in life Early in life Straight-line C. Early in life Late in life Straight-line D. Late in life Late in life Straight-line E. Late in life Early in life Accelerated Multiple Choice Choice A Choice B Choice C Choice D Choice E
Multiple choice: a benefit of using an accelerated depreciation method is that a. it is preferred by the tax code b. it yields a higher income in the early years of an asset's useful life c. it yields a larger depreciation expense in the early years of an asset's life d. the results are identical to straight line depreciation
The use of accelerated depreciation for tax purposes and straight-line depreciation for accounting purposes results in: O The asset being fully depreciated for tax purposes in half the time it takes to become fully depreciated for accounting purposes. O A larger amount of depreciation expense shown on the tax return than on the income statement over the asset's useful life. O A larger amount of depreciation expense shown on the income statement than on the tax return in the last year of the asset's useful life. O A loss on the sale of the asset in question if it is sold for its book value before its useful life expires.
Which of these statements about depreciation is true? a. MACRS depreciation incorporates only declining balance depreciation in itscomputations for all assets.b. Straight line depreciation is actually not straight at all, but is based on anexponential decay function.c. For twenty-first century assets in the U.S., MACRS depreciation and taxdepreciation have the same meaning.d. Gains tax is paid on any revenue that exceeds the year's depreciation allowance.
If a company is seeking to minimize its income tax expense, the depreciation method it would most likely select would be the: units of production method straight-line method single-and-a-half depreciation method double-declining balance method
Many companies use an accelerated depreciation method because: A. It is required by the tax code.B. It is required by financial reporting rules.C. It yields larger depreciation expense in the early years of an asset's life.D. It yields a higher income in the early years of the asset's useful life.E. The results are identical to straight-line depreciation.
The depreciation method used shall reflect the pattern in which the asset’s future economic benefits areexpected to be consumed by the entity. Which statement is incorrect regarding depreciation methods?a. Straight-line depreciation results in a constant charge over the useful life if the asset’s residual value does not change.b. The diminishing balance method results in a decreasing charge over the useful lifec. The units of production method results in a charge based on the expected use or outputd. A depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is appropriate.
When determining the best time to replace an existing asset, for what reason would you need to use marginal analysis?a. To determine what the most appropriate tax rate for the project should beb. To estimate the cost of capital for the new assetc. To determine if the defender asset should be used beyond its ESL.d. To determine the length of time the challenger asset should be used once it is placed into service.
True or False: If a project involves buying an asset, and if the company uses “accelerated depreciation” for tax purposes, after-tax cash flows for the project would be smaller in earlier years of the project than if the company used “straight line depreciation”, and therefore the project’s NPV would be smaller if it used accelerated depreciation, compared to the NPV if it used straight-line depreciation. Explain your answer.
Match the concept that closely describes a particular depreciation method. Choose the correct answer lowers the tax liability a) double-declining balance method b) units-of-production method c) straight-line method more closely matches the expense with the benefit of the asset a) double-declining balance method b) units-of-production method c) straight-line method most commonly used method a) double-declining balance method b) units-of-production method c) straight-line method
Which of the following will maximize net income by minimizing depreciation expense in the first year of the asset’s life? a. Short service life, high residual value, and straightline depreciation.b. Long service life, high residual value, and straightline depreciation.c. Short service life, low residual value, and doubledeclining- balance depreciation.d. Long service life, high residual value, and doubledeclining- balance depreciation.
Which of the following statements is/are correct? (i) An increase in the estimated useful life of a non-current (fixed) asset reduces the annual depreciation charge. (ii) A reduction in the estimated residual value of a non-current (fixed) asset decreases the annual depreciation charge. (iii) If the sales proceeds of a non-current (fixed) asset are greater than its net book value, this indicates insufficient charge of depreciation in the income statements (profit and loss accounts) of previous years. Is it a) (i) only b) (ii) only c) (i), (ii) and (iii) d) (i) and (ii) only

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