Joe Genius of ABC Corporation Is Considering Whether to Engage

question 1

Multiple Choice

Joe Genius of ABC Corporation is considering whether to engage in a financial lease or to purchase a large capital asset.If Joe purchases the asset,he will use debt financing.Which of the following accurately describes the similarities in the tax treatment of leasing and purchasing with debt?

• A)Both methods allow for deductions which reduces taxable income.
• B)The after-tax net present value of the two methods will usually be identical.
• C)The timing of cash payments and tax savings is the same under both alternatives.
• D)Capital cost allowance is always expensed for both alternatives.

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Definitions:

Teratogen

Any agent or factor that can cause malformation of an embryo or fetus, which includes certain chemicals, drugs, and infections.

Artificial Sweetener

Substances used to sweeten foods and beverages that contain little to no calories, used as an alternative to sugar for weight control or diabetes management.

Fetus

a developing mammal or human from the end of the embryonic stage until birth.

Habituation

A psychological learning process wherein there is a decrease in response to a stimulus after being repeatedly exposed to it.