A Company Uses Straight-Line Instead of the Units of Production

question 51

Multiple Choice

A company uses straight-line instead of the units of production method of depreciation. Assuming a tax rate of zero, which statement is true as a result of its choice of depreciation methods?

• A)Cash flows from operations will be less than under the straight-line method
• B)Cash flows from operations will be more than under the straight-line method
• C)Cash used for investing activities will be more than under the straight-line method
• D)Cash flows are the same as if the straight-line method had been used.

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Definitions:

Intent to Benefit

A principle that refers to the deliberate desire to provide benefits or advantages through a contract to a specific party or parties.

Language Used

The specific words, terms, and phrases employed in communication or documentation, which can influence interpretation and understanding.

Surrounding Circumstances

The context or conditions existing at the time of an action or event, often considered in legal interpretations, negotiations, or contract formations.

Promisor

The party in a contract who makes a promise to perform an obligation to the promisee.