Assume that a company chooses an accelerated method of calculating depreciation expense for financial statement reporting purposes
Question:
Required:
State the effect (higher, lower, no effect) of accelerated depreciation relative to straight-line depreciation on
a. Depreciation expense in the first year.
b. The asset’s net book value after two years.
c. Cash flows from operations (excluding income taxes).
Step by Step Answer:
a Accelerated depreciation expense in the first year will be higher than stra...View the full answer
Accounting What the Numbers Mean
ISBN: 978-0073527062
9th Edition
Authors: David H. Marshall, Wayne W. McManus, Daniel F. Viele,
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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