Consider the Following Statements

question 12

Multiple Choice

Consider the following statements. Since money has a time value:
i. businesses will take tax deductions as early as possible.
ii. businesses will take tax deductions as late as possible.
iii. businesses will obtain a greater tax benefit by using the diminishing value method of depreciation.
Which of the above statements is/are correct?

• A) i
• B) ii
• C) i and iii
• D) ii and iii

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Definitions:

Periodic Inventory System

A method of inventory valuation for financial accounting purposes where a physical count is performed at specific intervals to determine the ending inventory balance and the cost of goods sold.

Closing Entries

Journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts and prepare the company’s books for the next accounting period.

Merchandise Inventory

Goods that a company holds in stock with the intent to sell them as part of its business operations.

Purchase Discount

A reduction in the price of goods that a buyer can avail of for making early payments to the seller.