Using the Straight-Line Depreciation Method Will Cause a Company to Incur

question 175

Multiple Choice

Using the straight-line depreciation method will cause a company to incur ____ tax expense in the early years of an asset's life than they would experience using an accelerated method of depreciation.

• A) more
• B) less
• C) equal
• D) This cannot be determined from the information given.

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Definitions:

Income Tax Expense

The total amount of income tax owed to tax authorities, reflecting current tax and deferred tax charges and credits for the period.

Deferred Tax Liability

A tax obligation that a company owes but can postpone to future periods.

Interest Revenue

Income earned by an entity for lending funds or making financial investments that pay interest.

Interest Expense

The cost incurred by an entity for borrowed funds, reflected on the income statement as a reduction of profits.