Which of the Following Statements About Depreciation Is Correct

question 15

Multiple Choice

Which of the following statements about depreciation is correct?

• A)The depreciation method selected has no impact on cash flows.
• B)The depreciation method selected has no impact on net income.
• C)Consistency requires that the same method of depreciation should be used for all classes of assets.
• D)Straight-line depreciation produces higher depreciation expense in the early years of an asset's useful life.

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Definitions:

Owner Relationship

The legal and operational connections and responsibilities between the owner(s) and their business entity.

Short-Term Investments

Investments that are typically held for one year or less, intended for quick gains or temporary cash investment.

Sinking Funds

A type of savings account or fund that is set up to repay debt or an outstanding loan, making periodic payments into the fund for this purpose.

Operating Cycle

The duration of time it takes for a company to purchase inventory, sell the products, and collect cash from the sales.