Use the information below to answer the following questions:
Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance, with the agreement of its auditors and taxation authorities. As a result, its annual depreciation expense increases by $200,000. The company’s income tax rate is 40%.
-Which of the following could NOT explain a substantial increase in the current ratio?
A) slow collection of debtors
B) sale of a major noncurrent asset near year-end
C) a large prepayment near year-end
D) a change from LIFO to FIFO.

Question

Use the information below to answer the following questions:
Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance, with the agreement of its auditors and taxation authorities. As a result, its annual depreciation expense increases by $200,000. The company’s income tax rate is 40%. 
-Which of the following could NOT explain a substantial increase in the current ratio?
A) slow collection of debtors
B) sale of a major noncurrent asset near year-end
C) a large prepayment near year-end
D) a change from LIFO to FIFO.

Quizplus · Accepted Answer

The Answer of Use the information below to answer the following questions:
Unstable Ltd has decided to change its depreciation method from straight-line to reducing balance, with the agreement of its auditors and taxation authorities. As a result, its annual depreciation expense increases by $200,000. The company’s income tax rate is 40%. 
-Which of the following could NOT explain a substantial increase in the current ratio?
A) slow collection of debtors
B) sale of a major noncurrent asset near year-end
C) a large prepayment near year-end
D) a change from LIFO to FIFO.

Use the Information Below to Answer the Following Questions