Which of the following statement completions is NOT CORRECT? For a profitable firm,when MACRS accelerated depreciation is compared to straight-line depreciation,MACRS accelerated allowances produce
A) Higher depreciation charges in the early years of an asset's life.
B) Larger cash flows in the earlier years of an asset's life.
C) Larger total undiscounted profits from the project over the project's life.
D) Smaller accounting profits in the early years,assuming the company uses the same depreciation method for tax and book purposes.
E) Lower tax payments in the earlier years of an asset's life.

Question

Quizplus · Accepted Answer

MACRS accelerated depreciation results in higher depreciation charges in the early years of an asset's life (A), larger cash flows in the earlier years of an asset's life (B), smaller accounting profits in the early years assuming the company uses the same depreciation method for tax and book purposes (D), and lower tax payments in the earlier years of an asset's life (E). However, MACRS accelerated depreciation does not necessarily result in larger total undiscounted profits from the project over the project's life (C). This is because the choice of depreciation method only affects the timing of when depreciation charges are taken, not the total amount of depreciation over the asset's life.

Which of the Following Statement Completions Is NOT CORRECT? for a Profitable