Using a Smaller Salvage Value When Calculating Depreciation Expense for Long-Term

question 80

Multiple Choice

Using a smaller salvage value when calculating depreciation expense for long-term assets ________.

• A)increases earnings per share
• B)decreases earnings per share
• C)has no effect on earnings per share
• D)decreases shareholders' equity

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Definitions:

STRIPS

Separate Trading of Registered Interest and Principal of Securities; a form of a bond that separates its interest payments from its principal repayment obligation, enabling investors to hold and trade them separately.

Expectations Theory

A theory related to the term structure of interest rates, suggesting that the long-term interest rates reflect expected future short-term interest rates.

Forward Rate

The agreed-upon exchange rate for a currency, security, or commodity to be delivered and paid for at a future date, used in forward contracts.

Zero-coupon Bonds

Bonds that are issued at a discount to their face value and do not pay interest during their life but are redeemed at full face value at maturity.