Assume That Congress Recently Passed a Provision That Will Enable

question 94

Multiple Choice

Assume that Congress recently passed a provision that will enable Bev's Beverages Inc.(BBI) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or the tax rate.Prior to the new provision,BBI's net income was forecasted to be $4 million.Which of the following best describes the impact of the new provision on BBI's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

• A) The provision will reduce the company's cash flow.
• B) The provision will increase the company's tax payments.
• C) The provision will increase the firm's operating income (EBIT).
• D) The provision will increase the company's net income.
• E) Net fixed assets on the balance sheet will decrease.

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Definitions:

Subliminal Stimuli

Stimuli presented below the threshold of conscious awareness, which can nonetheless affect thoughts, feelings, or actions.

Unconscious Thought

Mental processes that occur without conscious awareness, influencing behaviors, perceptions, and attitudes.

Collective Unconscious

A concept introduced by Carl Jung, referring to the part of the unconscious mind which is derived from ancestral memory and experience and is common to all humankind.

Implicit Memories

Memories that influence thoughts and behaviors without conscious awareness, such as learned skills and conditioned responses.