Use the Information Below to Answer the Following Questions

question 36

Multiple Choice

Use the information below to answer the following questions:
Plant Hire Ltd has been in business for one year. The company makes it a practice to capitalise a portion of its advertising costs as a ‘deferred asset’ and to amortise them at 25% per annum. The accountant has suggested to the general manager that the policy of capitalising advertising should be ended because the economic benefit of the expenditures is not clearly determinable. The amount of advertising capitalised this year was $100 000.
-What effect would such a policy change have on cash flow from operations?

• A) There would be a $75 000 reduction.
• B) There would be a $45 000 reduction.
• C) There would be a $30 000 reduction.
• D) There would be no effect.

---

Definitions:

Effective Communication

The exchange of information in a clear, concise, and understandable manner, ensuring the intended message is received and understood.

Extraneous Factors

External factors that can influence the results of a study or experiment but are not the variables being studied.

Printing Mistakes

Errors that occur during the printing process, leading to inaccuracies or defects in the final printed material.

Newspaper Advertisement

This is an ad placed in a newspaper to reach its readership, used by businesses to target specific geographical areas or demographics.