Which of the Following Statements Is Correct

question 55

Multiple Choice

Which of the following statements is correct?

• A)Using straight-line depreciation in comparison to an accelerated depreciation method will result in a lower reported amount of total assets at end of the first year of an asset's life.
• B)Using accelerated depreciation in the first year of an asset's life will result in a higher net income during the first year compared to using the straight-line depreciation method.
• C)Using an accelerated depreciation method will lead to a higher fixed asset turnover ratio for the first year.
• D)Using straight-line depreciation in comparison to an accelerated depreciation method will lead to a higher book value at the end of an asset's life.

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Definitions:

Commercial Paper

Corporations issue this unsecured, short-term financial instrument to cover expenses related to payroll, accounts payable, and inventories.

Maturity

The time at which the principal or final payment of a financial instrument, such as a bond or loan, is due to be paid in full.

Interest Rate

The amount charged by lenders to borrowers for the use of money, expressed as a percentage of the principal, typically on an annual basis.

Compensating Balance

A minimum account balance that a company agrees to maintain in a bank account, often to qualify for favorable terms on a loan from the bank.