Four Events Pertaining to PPE Assets Are Described Below

question 15

Essay

Four events pertaining to PPE assets are described below.
(a) Computed depreciation for use in the annual income tax return (a different method is used in the financial statements).
(b) Made a year-end adjusting entry to record depreciation expense for financial reporting purposes.
(c) Sold old equipment for cash at a price below its book value, but above its income tax basis.
(d) Traded an old automobile in on a new one. The dealer granted a trade-in allowance on the old vehicle that was substantially above its book value and its tax basis. However, the trade-in allowance amounted to only a small portion of the price of the new car; most of the purchase price was paid in cash.
Indicate the immediate effects of each of these events upon the financial measurements in the four column headings listed below. Use the code letters, I for increase, D for decrease, and NE for no effect.
Note: Indicate only the immediate effects of each transaction. Do not attempt to anticipate how changes in taxable income will affect future cash flows.
$\begin{array}{|c|c|c|c|c|}\hline \text { Transaction } & \text { Current assets } & \text { Profit } & \text { Taxable income } & \begin{array}{c}\text { Net cash flow } \\\text { (all activities } \\\text { combined) }\end{array} \\\hline \text { (a) } &\underline{\quad\quad} &\underline{\quad\quad} & \underline{\quad\quad}&\underline{\quad\quad} \\\hline \text { (b) } & \underline{\quad\quad}& \underline{\quad\quad} & \underline{\quad\quad} &\underline{\quad\quad} \\\hline \text { (c) } & \underline{\quad\quad}&\underline{\quad\quad}& \underline{\quad\quad} &\underline{\quad\quad} \\\hline \text { (d) } &\underline{\quad\quad} & \underline{\quad\quad}& \underline{\quad\quad}&\underline{\quad\quad} \\\hline\end{array}$

---

Definitions:

Ethnography

A research method used in social sciences for the systematic study of cultures and people through direct observation, interviews, and other qualitative methods.

White Students

Students who are identified or identify themselves as having origins in any of the original peoples of Europe, the Middle East, or North Africa.

Majority Black School

An educational institution where the majority of enrolled students are of Black or African American descent.

Communication Style

The characteristic way in which individuals express themselves verbally and nonverbally when interacting with others.