Which of the Following Statements Is CORRECT

question 55

Multiple Choice

Which of the following statements is CORRECT?

• A) Under current laws and regulations, corporations must use straight-line depreciation for all assets whose lives are 5 years or longer.
• B) Corporations must use the same depreciation method (e.g., straight line or accelerated) for stockholder reporting and tax purposes.
• C) Since depreciation is not a cash expense, it has no effect on cash flows and thus no effect on capital budgeting decisions.
• D) Under accelerated depreciation, higher depreciation charges occur in the early years, and this reduces the early cash flows and thus lowers a project's projected NPV.
• E) Using accelerated depreciation rather than straight line would normally have no effect on a project's total projected cash flows but it would affect the timing of the cash flows and thus the NPV.

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Definitions:

Restaurant

A business establishment where meals are prepared and served to customers in exchange for money.

Proprietorship

A business owned and operated by a single individual, characterized by the simplicity of setting up and the sole responsibility for any of its debts or liabilities.

Financial Difficulty

A situation where an individual, business, or government faces challenges in meeting its debt obligations or managing its monetary affairs.

Bankruptcy

A legal process where individuals or organizations declare their inability to pay off their debts.