Lucy's Music Emporium Opened Its Doors on January 1,2012,and It

question 25

Multiple Choice

Lucy's Music Emporium opened its doors on January 1,2012,and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes.The company planned to depreciate its fixed assets over 20 years,but in December 2012 management realized that the assets would last for only 15 years.The firm's accountants plan to report the 2012 financial statements based on this new information.How would the new depreciation assumption affect the company's financial statements?

• A) The firm's net liabilities would increase.
• B) The firm's reported net fixed assets would increase.
• C) The firm's EBIT would increase.
• D) The firm's reported 2012 earnings per share would increase.
• E) The firm's cash position in 2012 and 2013 would increase.

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