Match each item with the correct statement below.
-The reduction of our net income for tax purposes is allowed through CCA deductions,this creates a reduction in income taxes payable.

Question

Quizplus · Accepted Answer

The statement refers to CCA deductions, which is an accounting term relating to tax depreciation. The abbreviation stands for Capital Cost Allowance, and it allows for a reduction in net income for tax purposes, thereby reducing income taxes payable. This is commonly referred to as the CCA Tax Shield.

Answer: K
 The statement refers to the reduction of income taxes payable. To calculate the present value of savings from income taxes, one would use discounted cash flow analysis, which is commonly abbreviated as DCF or discounted cash flows.

Answer: I and K
 The statement refers to the reduction of income taxes payable by deducting CCA from net income, which creates a tax shield. This is an example of using discounted cash flows (DCF) to determine the net present value (NPV) of the tax shield over time. This could also be used in the context of evaluating a capital investment project, such as determining the payback period or internal rate of return (IRR), which are also included in the list of choices. However, the most specific and relevant choices are I and K.

Match Each Item with the Correct Statement Below