Trainer Ltd Is Trying to Decide Whether to Change from the Reducing

question 17

Multiple Choice

Trainer Ltd is trying to decide whether to change from the reducing balance method of depreciation to the straight-line method for both accounting and tax purposes.Using the reducing balance method at the rate allowable for taxation purposes,the expense would be $1 020 000.If it changed to the straight-line method,depreciation expense would be $680 000.If the straight-line method were used instead of the reducing balance method,
-which of the following is NOT affected?

• A) net profit.
• B) cash flow from operations.
• C) income tax liability.
• D) amortisation expense.

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Definitions:

Direct Bankruptcy Costs

The costs that are directly associated with bankruptcy, such as legal and administrative expenses.

Financial Trouble

Financial trouble indicates a situation where an individual, company, or other entity is struggling to manage or repay their debts or meet financial obligations.

High-quality Employees

Refers to employees who are highly skilled, efficient, and produce excellent work consistently.

Direct Bankruptcy Costs

Expenses directly associated with the bankruptcy process, including legal and administrative fees.