Assue that a company chooses an accelerated method ofcalculating depreciation ex

Question

Assue that a company chooses an accelerated method ofcalculating depreciation expense for financial statement reportingpurposes for an aseet with a five-year life. Required: State the effect (higher, lower, no effect) of accelerateddepreciation relative to straight-line depreciation on
A. Depreciation expnse in the first year. B. The asset's net book value after two years. C. Cash flows from operations (excluding income taxes).
Assue that a company chooses an accelerated method ofcalculating depreciation expense for financial statement reportingpurposes for an aseet with a five-year life. Required: State the effect (higher, lower, no effect) of accelerateddepreciation relative to straight-line depreciation on
A. Depreciation expnse in the first year. B. The asset's net book value after two years. C. Cash flows from operations (excluding income taxes).

Explanation / Answer

A. Depreciation expnse in the first year - Higher. SLN dep is evenly spread over 5 yrs while Accelarated Dep is highre in initial yrs.
B. The asset's net book value after two years. Ans: Lower. Due to Highr dep in initial yrs, Net BV will be lower.
C. Cash flows from operations (excluding income taxes). Ans : Lower. Due to higher Dep, EBT will be lower.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.