Which of the following typically results from using straight-line depreciation rather than MACRS in the set of books for shareholders?
A) Net income appears higher during the early periods of depreciation.
B) Less money is paid to the Internal Revenue Service over an asset's life.
C) Financial managers have more funds from operations available over the asset's life.
D) Cash flow from operations will be higher in the second year of the asset's life.

Question

Quizplus · Accepted Answer

Straight-line depreciation will result in a higher depreciation expense in the early years of an asset's life, which will lower net income. This is because the same amount of depreciation expense is allocated over the entire useful life of the asset, whereas MACRS front-loads the depreciation expense.

Which of the Following Typically Results from Using Straight-Line Depreciation