The Nantell Corporation just purchased an expensive piece of equipment.Originally,the firm planned to depreciate the equipment over 5 years on a straight-line basis,but now wants to depreciate the equipment on a straight-line basis over 7 years.Other things held constant,what will occur as a result of this change? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

Question

Quizplus · Accepted Answer

By extending the depreciation period from 5 to 7 years, the annual depreciation expense decreases, resulting in higher net fixed assets on the balance sheet at the end of the year.

The Nantell Corporation Just Purchased an Expensive Piece of Equipment