Which of the Following Statements Is CORRECT

question 70

Multiple Choice

Which of the following statements is CORRECT?

• A) Depreciation and amortization are not cash charges,so neither of them has an effect on a firm's reported profits.
• B) The more depreciation a firm reports,the higher its tax bill,other things held constant.
• C) People sometimes talk about the firm's net cash flow,which is shown as the lowest entry on the income statement,hence it is often called "the bottom line."
• D) Depreciation reduces a firm's cash balance,so an increase in depreciation would normally lead to a reduction in the firm's net cash flow.
• E) Net cash flow (NCF)is often defined as follows:
• Net Cash Flow = Net Income + Depreciation and Amortization Charges.

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Definitions:

Process Costing System

A costing method used in production environments where similar products are mass-produced, allocating costs over the whole production process.

Equivalent Units

A concept used in cost accounting to convert partially completed units of production into a number of fully completed equivalent units.

Process Costing System

A process costing system is an accounting method used to allocate costs to units of product in continuous or repetitive processes, suitable for industries producing homogeneous products.

Conversion Costs

Conversion costs are manufacturing expenses incurred in converting raw materials into finished products, including direct labor and manufacturing overhead.