Assume That Pappas Company Commenced Operations on January 1, 2010

question 39

Multiple Choice

Assume that Pappas Company commenced operations on January 1, 2010, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes.The company planned to depreciate its fixed assets over 15 years, but in December 2010 management realized that the assets would last for only 10 years.The firm's accountants plan to report the 2010 financial statements based on this new information.How would the new depreciation assumption affect the company's financial statements?

• A)The firm's reported net fixed assets would increase.
• B)The firm's EBIT would increase.
• C)The firm's reported 2010 earnings per share would increase.
• D)The firm's cash position in 2010 and 2011 would increase.
• E)The firm's net liabilities would increase.

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Definitions:

Triple-Net Lease

A lease in which the tenant pays a base monthly rent plus real estate taxes, insurance, and any other operating expenses incurred for the building.

Net Lease

A lease in which the tenant pays a base monthly rent plus some or all real estate taxes of the building.

Free-Flow Layout

A type of layout used by small retail stores that encourages customers to wander and browse through the store.

Encourages Customers

Strategies or actions taken by businesses to motivate potential buyers to purchase their products or services, often through promotions, excellent customer service, and engaging marketing.