If a company buys a machine for $10,000 cash and plans to depreciate it at $1,000 per year for 10 years, the two most important aspects of this transaction to the finance manager (as opposed to the accountant)are:
A)the purchase of the machine and the tax savings from the depreciation expense.
B)recording the purchase of the machine and its depreciation expense.
C)calculating depreciation expense and its compliance with the tax code.
D)the impact on factory capacity due to the equipment purchase.

Question

Quizplus · Accepted Answer

The finance manager would be concerned about the cash outflow of $10,000 and the impact on the company's cash reserves. Additionally, they would be interested in the tax savings from the depreciation expense, which would impact the company's tax liability. The other choices may be important considerations, but they are not the two most important aspects from a finance manager's perspective.

If a Company Buys a Machine for $10,000 Cash and Plans