Cabbie Compartments Corporation Is Considering the Use of Accelerated Depreciation

question 29

Multiple Choice

Cabbie Compartments Corporation is considering the use of accelerated depreciation rather than straight-line depreciation for a new asset acquisition. Which of the following choices correctly shows when the majority of depreciation would be taken (early or late in the asset's life) , when most of the tax savings occur (early or late in the asset's life) , and which depreciation method would have the higher present value? $\begin{array} { | l | l | l | l | l | } \hline & \begin{array} { c } \text { When Majority } \\\text { of Depreciation } \\\text { is Taken }\end{array} & \begin{array} { c } \text { When Majority } \\\text { of Tax Savings } \\\text { Occur }\end{array} & \begin{array} { c } \text { Depreciation Method } \\\text { With Higher Present } \\\text { Value }\end{array} \\\hline 1 & \text { Early in life } & \text { Early in life } & \text { Accelerated } \\\hline 2 & \text {Early in life } & \text { Early in life } & \text { Straight-line } \\\hline 3 & \text { Early in life } & \text { Late in life } & \text { Straight-line } \\\hline 4 & \text { Late in life } & \text { Late in life } & \text { Straight-line } \\\hline 5 & \text { Late in life } & \text { Early in life } & \text { Accelerated } \\\hline\end{array}$

• A)1
• B)2
• C)3
• D)4
• E)5

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