A Firm Will Depreciate a Computer Costing $10,000 Over Five

question 117

Multiple Choice

A firm will depreciate a computer costing $10,000 over five years using the straight-line methods for financial reporting.For tax purposes,the company will use an accelerated method as follows:

Assuming a tax rate of 40 percent,what is the relevant cash flow for present value analysis associated with the tax savings related to depreciation for Year 2?

• A)$1,280.
• B)$1,667.
• C)$1,920.
• D)$3,200.

Grasp the principles of break-even analysis, including the calculation and interpretation of the break-even point.

Identify and analyze fixed, variable, and total costs in a business context.

Understand the role of pricing objectives and constraints in setting prices.

Comprehend the factors that impact price sensitivity and demand elasticity.

---

Definitions:

Indirect Method

A way of preparing the cash flow statement where net income is adjusted for non-cash transactions and changes in working capital to arrive at operating cash flow.

Accounts Receivable

Funds that clients or customers owe to a company for products or services delivered but not yet compensated for.

Accounts Payable

Liabilities of a business that are due to suppliers and creditors within the short term, typically less than a year.

Treasury Stock

Shares that were issued and subsequently reacquired by the company, reducing the amount of outstanding stock on the open market.