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Anton [14]
3 years ago
5

Assume that a company currently depreciates its fixed assets over 7 years. Which of the following would occur if a tax law chang

e forced the company to depreciate its fixed assets over 10 years instead?
A. The company's tax payment would increase
B. The company's cash position would increase
C. The company's net income would increase.
D. Statements a and b are correct
E. Statements b and c are correct.
Business
1 answer:
KATRIN_1 [288]3 years ago
6 0

Answer: E. Statements b and c are correct.

Explanation:

Should the company begin to depreciate over a 10 year period as opposed to 7, that would mean that the depreciation expense per year will reduce as it is now spread over a longer period. Because Depreciation reduces the Net Income and therefore reduces the taxes on the Net Income, reducing depreciation means that there is more Net Income. This will mean that the company can be taxed more.

Also, as just mentioned, spreading Depreciation over a longer period will reduce the depreciation expense. This would translate to a lower reduction in the Net Income so the Net Income will increase by this change.

For example, if a $70,000 asset was to be depreciated to $0 over 7 years, those payments would be $10,000 each using the Straight line method. This would reduce Net Income by $10,000 every year. If the period was changed to 10 years, the amount drops to $7,000 per year which would mean only $7,000 to remove from the Net Income meaning there'll be more Net Income and hence, more taxes.

If you need any clarification do react or comment.

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c. The present value of the perpetuity has to be higher than the present value of either the ordinary annuity or the annuity due

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Considering the following statements:

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  • In case of perpetuity the times is not limited, hence would get the higher return.
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Codetermination:
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Answer:D. is the inclusion of a corporation's employees on its board.

Explanation: Codetermination is a term applied in terms of describing the board composition of a corporation to mean the inclusion of the employees of a corporation to form part of the board and also take part in determining the pace and processes of decision making within an organisation.

Codetermination ensure that workers also also part of the decision makers in a corporate entity.

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Manufacturing uses normal costing for its​ job-costing system, which has two​ direct-cost categories​ (direct materials and dire
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Answer:

Results are below.

Explanation:

Giving the following information:

Total manufacturing costs, $8,450,000

Manufacturing overhead allocated, $3,750,000 (allocated at a rate of 250% of direct manufacturing labor costs)

Work-in-process inventory on January 1, 2017, $390,000

Cost of finished goods manufactured, $8,020,000

<u>First, we need to calculate the direct material and direct labor:</u>

Direct labor= Manufacturing overhead allocated/2.5

Direct labor=  3,375,000 / 2.5

Direct labor= $1,350,000

Total manufacturing costs= Direct material + direct labor + allocated overhead

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Direct material= $3,725,000

<u>Finally, the ending work-in-process:</u>

cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP

8,020,000= 390,000 + 8,450,000 - Ending WIP

Ending WIP= $820,000

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2 years ago
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