Using Different Depreciation Methods for Book Purposes Versus Tax Purposes

question 163

Multiple Choice

Using different depreciation methods for book purposes versus tax purposes for the same asset is

• A)not allowed since the amount can only be calculated one way or the other,not both.
• B)the direct result of the differing goals of financial and tax accounting.
• C)contrary to GAAP.
• D)against the Internal Revenue Code,and as such,against the law.

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Definitions:

Compounded Semi-annually

The process of calculating interest on the principal balance and previously earned interest every six months.

GIC

A finance option available in Canada, the Guaranteed Investment Certificate provides investors with a secured rate of return over an established time period.

Equivalent Value

The monetary value considered to be equal in worth to a specified amount under different conditions or in a different context.

Rate of Return

An investment's performance, marked by gains or losses during a defined period, articulated as a percentage of its beginning cost.