A Key Reason That There Are Various Acceptable Depreciation Methods

question 43

Multiple Choice

A key reason that there are various acceptable depreciation methods is

• A)different assets have different expected usage patterns.
• B)some methods are too complicated to calculate.
• C)to make it easier to calculate corporate income taxes.
• D)to account for assets with indefinite lives.

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Definitions:

Net Operating Income

A measure of a company's profitability, calculated by subtracting operating expenses from gross profit, not including non-operating income and expenses, interest, and taxes.

Break-even Point

A situation where overall expenses and earnings balance out, leaving no profit or deficit.

Fixed Expenses

Recurring costs that do not fluctuate with changes in production level or sales volume, such as rent, salaries, and insurance.

Operating Leverage

A financial ratio that measures the degree to which a firm can increase operating income by increasing revenue, highlighting the impact of fixed versus variable costs.