If a fiRm Does Not Expect to Owe Taxes for a Few

question 116

Multiple Choice

If a firm does not expect to owe taxes for a few years and needs some equipment, the firm should:

• A) Lease the equipment and retain the tax benefits.
• B) Lease the equipment with the lessor retaining the tax ownership of the asset.
• C) Borrow the money to buy the asset and then depreciate it using CCA depreciation.
• D) Buy the equipment with cash and depreciate it using CCA.
• E) Buy the equipment and depreciate it straight-line over the life of the asset.

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Definitions:

Realized Gain

The profit earned from the sale of an asset, which has been converted from an unrealized gain into cash or an equivalent.

Available-For-Sale

A classification for securities that are not held to maturity or for trading purposes, with unrealized gains or losses reported in equity.

Carrying Value

The stated value of an asset on a company's balance sheet, minus accumulated depreciation or amortization.