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.

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Definitions:

Skill-building

The process of developing and enhancing abilities or competencies in a specific area.

Cortisol

A steroid hormone, produced by the adrenal gland, that regulates a wide range of processes throughout the body, including metabolism and the immune response. It's commonly known as the "stress hormone."

Depression

A psychological impairment characterized by continuous depressive emotions or apathy towards customary engagements, heavily disrupting normal daily functioning.

Immune Functioning

The processes and activities carried out by the immune system to protect the body against diseases, infections, and foreign substances.