Indicate whether each of the following statements regarding accounting for long-term assets is true or false.a)Other things being equal, the lower a company estimates the salvage value of a plant asset to be, the higher the company's net income will be.b)Depreciation expense is an example of a "non-cash" expense.c)For tax purposes, the most desirable depreciation method is the one that produces the lowest amount of depreciation expense.d)The book value of an asset is the amount a company believes it is worth (its fair value)as of the date of the balance sheet.e)A company that uses the straight-line method for financial statement reporting and MACRS for tax reporting will show a deferred tax liability in an asset's early life.

Question

Quizplus · Accepted Answer

b)True c)False d)False e)Ta)This is false. A lower salvage value will produce greater depreciation expense, and lower, not higher, net income.b)This is true. Depreciation does not affect cash.c)This is false. For tax purposes, greater depreciation expense produces lower income tax expense.d)This is false. The book value of an asset is equal to the asset's historic cost minus its accumulated depreciation.e)This is true. Using the MACRS depreciation method delays taxes, resulting in a deferred tax liability.

Indicate Whether Each of the Following Statements Regarding Accounting for Long-Term