In the short run,asset replacement decisions often result in lower reported profits in the period of replacement.Which of the following does not contribute to this?
A) The new asset must be paid for in the period of replacement.
B) The cost savings or increase in revenues generated by the new asset may not start immediately, and/or often, a loss on disposal of the existing asset must be reported in the period of replacement.
C) Often, a loss on disposal of the existing asset must be reported in the period of replacement.
D) The cost savings or increase in revenues generated by the new asset may not start immediately.

Question

Quizplus · Accepted Answer

The payment for a new asset is a cash flow issue and does not directly affect the profit and loss statement in the period of replacement. Expenses related to the asset, such as depreciation, affect reported profits, not the cash outlay to purchase the asset.

In the Short Run,asset Replacement Decisions Often Result in Lower