The use of accelerated depreciation for tax purposes will generally produce a present value of tax savings that is ________.
A)less than the present value of tax savings provided by straight-line depreciation
B)greater than the present value of tax savings provided by straight-line depreciation
C)the same as the present value of tax savings provided by straight-line depreciation
D)less than the present value of tax savings provided by other depreciation methods

Question

Quizplus · Accepted Answer

Accelerated depreciation methods allow for a greater tax deduction in the earlier years of an asset's useful life, resulting in greater present value tax savings than straight-line depreciation. However, this also means that the tax deductions will be smaller in later years, resulting in a lower overall tax savings. Therefore, the total present value of tax savings will be higher with accelerated depreciation than with straight-line depreciation.

The Use of Accelerated Depreciation for Tax Purposes Will Generally