**The use of accelerated depreciation for tax purposes and straight-line depreciation for accounting purposes results in:**- ○ The asset being fully depreciated for tax purposes in half the time it takes to become fully depreciated for accounting purposes. - ○ A larger amount of depreciation expense shown on the tax return than on the income statement over the asset's useful life.- ○ 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.- ○ A loss on the sale of the asset in question if it is sold for its book value before its useful life expires.

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FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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3) ( Below table shows the calculations for an after-tax analysis of a machine purchase alternative. EOY ВТСР Depreciation Deduction Тахable Income АТCF Income Таxes - 20,000 16,000 16,000 16,000 16,000 16,000 18,000 3,000 3,000 3,000 3,000 3,000 3,000 13,000 13,000 13,000 13,000 13,000 15,000 - 6,500 - 6,500 - 6,500 - 6,500 - 6,500 - 7,500 - 20,000 9,500 9,500 9,500 9,500 9,500 1 3 4 6. 10,500 a) Find answers to the below questions What are the cost basis (price) and "annual revenues less expenses"? What is the terminal market value (or salvage value)? What is the income tax rate? i. ii. iii. iv. What is the method used for depreciation deduction? What is the book value at the end of useful life? V. b) Calculate the equivalent present worth (PW) and the equivalent annual worth (AW) at an after-tax MARR of 11%.
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Fill in the missing numbers for the following income statement. (Do not round intermediate calculations.) Sales Costs Depreciation EBIT Taxes (23%) Net income $ 659,000 420,100 98,900 a. Calculate the OCF. (Do not round intermediate calculations.) b. What is the depreciation tax shield? (Do not round intermediate calculations.) a. OCF $ 206,580 b. Depreciation tax shield
This depreciation method was brought about by the Tax Reform Act of 1986. a. Straight-Line O b. Modified Accelerated Cost Recovery System (MACRS) O c. Declining Balance O d. Accelerated Cost Recovery System (ACRS)
For the composite method, the composite a. rate is the total cost divided by the total annual depreciation. b. rate is the total annual depreciation divided by the total depreciable cost. c. life is the total cost divided by the total annual depreciation. d. life is the total depreciable cost divided by the total annual depreciation.
Which method of deprecation results in a lower amount for depreciation each year? ⒸA. Units of production B. Fixed instalment OC. Diminishing balance OD. Straight-line Previous page
If plant assets of a manufacturing company are sold at a gain of $1760000 with related income taxes of $550000, and the gain is not considered unusual, the income statement for the period would disclose these effects as O a prior period adjustment, net of applicable taxes, $1210000. O operating income, net of applicable taxes, $1210000. O again of $1760000 and an increase in income tax expense of $550000. .O a gain from discontinued operations, net of applicable taxes, $1210000.
With straight-line depreciation, the book value of the asset is reduced by the same amount each year. a. True b. False
Dividing accumulated depreciation by annual straight - line depreciation expense is best interpreted as an estimate of the: a) average life of a firm's assets. b) remaining life of a firm's assets. c) average age of a firm's assets.
35. For income statement purposes, depreciation is a variable expense if the depreciation method used is A) straight-line. B) sum-of-the-years'-digits. C) declining-balance. D) units-of-production.
A company should use a depreciation method that: Group of answer choices is randomly selected best reflects the asset’s decline in revenue-producing ability for the company. maximizes net income for the company a different method each year
With direct write off, one writes off amounts from sales in the past are determined to be uncollectible. An estimate writes off estimated amounts of current sales that are expected to be uncollectible. Does that help you determine the accounting principle used for estimates? And a fixed asset question: when an asset is fully depreciated (think Kate's Cards after four years when the equipment with cost of $4,800 has accumulated depreciation of $4,800), should a company keep it on the books? Why or why not?

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