Senior management of Telemark Skiing Ltd wishes to capitalise $2 650 000 in ski-hill improvement costs expended
Question:
Senior management of Telemark Skiing Ltd wishes to capitalise $2 650 000 in ski-hill improvement costs expended this year, and amortise the capitalised costs over 10 years, rather than just expensing them all as is now done. The company's income tax rate is 30 percent, and the company would plan to continue deducting the costs as expenses in computing income tax payable for this year, assuming the tax authorities would permit that. What would be the effect on this year's net profit and cash flow from operations if the company capitalised those costs?
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Capitalizing costs instead of expensing them usually means allocating the costs over a period of years in this case 10 years in the form of depreciati...View the full answer
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Related Book For 
Financial Accounting An Integrated Approach
ISBN: 9780170349680
6th Edition
Authors: Ken Trotman, Michael Gibbins, Elizabeth Carson
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