Assume That Congress Recently Passed a Provision That Will Enable

question 94

Multiple Choice

Assume that Congress recently passed a provision that will enable Bev's Beverages Inc.(BBI) to double its depreciation expense for the upcoming year but will have no effect on its sales revenue or the tax rate.Prior to the new provision,BBI's net income was forecasted to be $4 million.Which of the following best describes the impact of the new provision on BBI's financial statements versus the statements without the provision? Assume that the company uses the same depreciation method for tax and stockholder reporting purposes.

• A) The provision will reduce the company's cash flow.
• B) The provision will increase the company's tax payments.
• C) The provision will increase the firm's operating income (EBIT).
• D) The provision will increase the company's net income.
• E) Net fixed assets on the balance sheet will decrease.

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Definitions:

Personal Projects

Refers to the self-initiated and organized tasks or goals that an individual pursues, reflecting personal values and aspirations.

Panic Button Effect

The psychological response or relief felt when an individual believes they have an immediate means of escape or help in a stressful situation.

Narcissistic

Characterized by an excessive preoccupation with oneself and an inflated sense of self-importance.

Freelance

A type of employment where individuals work for themselves, taking on contract work from companies or individuals without committing to a single employer.