Explain why firms prefer to use accelerated depreciation methods over the straight-line method for tax purposes. | Homework.Study.com (2024)

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• Why is an accelerated depreciation method often used for income tax purposes?
• Why does the use of the accelerated depreciation method (instead of a straight line) for income tax reporting increase an investment's value?
• What are the differences between the straight line method of depreciation and the accelerated methods? Why do companies use different depreciation methods for tax reporting and financial reporting? What are the advantages and disadvantages of using differ
• Why would a firm use a depreciation method on its federal income tax return that is different from the method used on its financial statements?
• Why would a firm choose one depreciation method over another? What are the advantages of each method?
• Since depreciation does not affect cash, except for when dealing with the tax advantage, other than tax reasons, why should companies include depreciation expense in their income statements that they
• Which method is more conservative: the accelerated depreciation method or the straight-line depreciation method? Explain.
• Explain what is meant by an accelerated depreciation method. Are accelerated methods more widely used in financial statements or in income tax returns? Explain.
• Why do people use straight line depreciation instead of double declining balance?
• Why does the federal government allow for accelerated depreciation of fixed assets even when the useful life and utility of the assets clearly align more to straight-line depreciation? Explain.
• Why don't all companies use the same depreciation method? (a) US income tax regulations require that a company uses the same depreciation method for both financial reporting and income taxes (b) Different depreciation methods might better reflect the patt
• Why do we have various methods of depreciation? Explain.
• Why would a business select an accelerated method of depreciation for tax purposes? a. MACRS depreciation follows a specific pattern of depreciation. b. Accelerated depreciation generates a greater amount of depreciation over the life of the asset than
• Explain how to calculate and record depreciation expense under the straight-line method.
• What is the tax advantage of an accelerated depreciation method?
• Why would a company decide to change its depreciation, depletion, or amortization method?
• Why are depreciation methods important in accounting?
• Explain the concept of depreciation. Which of the following depreciation methods would you recommend: straight-line depreciation, double declining balance method, or an alternative method?
• An accelerated system of depreciation is often used for income tax purposes but not for financial reporting. Why?
• Explain the straight-line depreciation method and the double-declining balance method.
• Why does the federal government allow for accelerated depreciation of fixed assets, even when the useful life and utility of the assets clearly align more to straight-line depreciation?
• Which of the following depreciation methods is used by most companies for their tax returns? a. Units-of-production b. Straight-line c. Declining-balance d. All of the above methods are used about equally.
• Explain why income tax expense is usually not equal to accounting profit multiplied by the corporate tax rate. Your answer should refer to the main principles of accounting for income tax.
• Why do companies choose the indirect method over the direct method of accounting?
• What are the effects on the income statement of using the straight-line method of depreciation compared to the declining-balance method?
• Why would a company choose units-of-production depreciation instead of straight-line?
• Explain how the tax code allows depreciation to contribute to cash flow.
• How does the straight-line method of depreciation work?
• Why companies preferred the allowance method over the direct write off method of accounting for bad debts?
• Why is depreciation for income tax purposes an important concern of taxpayers?
• Why would you use different depreciation methods for different assets?
• How does a depreciation schedule assist an organization to maximize taxation deductions? Explain.
• Why is accrual-basis accounting the preferred method for most businesses?
• Explain why back depreciation is added back in the cash flow statement.
• Describe the difference between depreciation methods: Straight-line and Double Declining Balance
• Explain the purpose of depreciation and compare different methods of accounting for it.
• In a period of increasing prices, why would the company tax accountant prefer the last in, first out method while the CEO would prefer first in, first out? Why is this important?
• Explain why some businesses choose to use the LIFO method.
• What is depreciation? Why are accountants required to depreciate assets?
• Why is the payback method inferior to the discounted cash flow methods? When is the payback method helpful?
• Why does income statement and cash flow statement depreciation and amortization differ?
• Why do depreciation and amortization add back on discount cash flow (DCF)?
• How does tax depreciation differ from financial accounting depreciation?
• Which of the following method of depreciation provide a lower amount? a. Straight line method. b. Written down method. c. None of the above. d. All of the above.
• Explain what companies should consider before choosing a method of expensing long-lived assets cost. With that said, explain what some of the benefits and risks of various depreciation methods would be on a company's net income.
• Do you think it would be better to require all companies to use the same depreciation method? Explain?
• Explain why most companies generally do not use the direct write-off method of uncollectible accounts receivable.
• 1) What are at least four depreciation methods that are available to a company? 2) What are their similarities and differences? 3) Why does a company select one method over another?
• Is it appropriate to calculate depreciation using two different methods? Why or why not?
• Is it appropriate to calculate depreciation using two different methods? Explain why or why not.
• Which of the following depreciation methods is not an accelerated method? a. Straight-line b. Double-declining balance c. Sum-of-the-years' digits
• Why does depreciation get subtracted before tax is calculated and then added back to net profit to give cash?
• Why do people prefer direct method instead of indirect method when calculating operating cash flow?
• Why would a company choose to depreciate one piece of equipment using the double declining balance method?
• What are the different methods used to calculate depreciation? How does a company decide which method it should utilize? How does its choice affect the financial statements? Should companies standardi
• (a) Explain how to compute and record depreciation using the various methods. (b) Provide three examples.
• Why are discounted cash flow methods considered better than other methods for evaluating investments? Explain and discuss.
• Why do accountants use the accrual-basis method instead of the cash basis method of accounting?
• Describe why companies may prefer one accounting policy over another accounting policy.
• What does it mean to use an accelerated depreciation method?
• Explain the differences between depreciation expense and the accumulated depreciation.
• What are the major reasons why companies change accounting methods?
• Why is depreciation expense necessary, to properly match revenues and expense?
• Explain why accountants have to classify items as capital or revenue expenditures.
• Why does the FASB require companies using the direct method to also provide the indirect method?
• Why is depreciation considered a non-cash expense?
• Both the NPV method and the IRR method are considered financially sophisticated. Why would one be preferred to the other?
• Why is the income statement's depreciation disparate from the balance sheet's depreciation?
• Why does the accounting profession prefer the allowance method over the direct write-off method?
• Explain the purpose of and method of depreciation for partial years.
• Why is an accumulated depreciation account used in making the adjustment for depreciation?
• Write and explain all depreciation methods.
• Explain the two methods to amortize the bond premium and discount. Give example journal entries for the two different amortization methods.
• Why does depreciation get added back as a non-cash expense?
• Why does income statement depreciation not match cash flow statement depreciation?
• Explain how depreciation may be justified from an 'Income and Expense' view of conceptual primacy.
• Explain why plant assets must be depreciated. Does the depreciation process result in the calculation of the true value of an asset?
• Why would businesses be interested in selecting the LIFO cost flow inventory method?
• Why is depreciation expense necessary to properly match revenues and expenses?
• Explain why the direct write-off method does not comply with GAAP.
• Explain how to account for a change in depreciation method.
• Briefly explain how to account for a change in depreciation method.
• What is meant by an "accelerated" depreciation method?
• What is accelerated depreciation? Why is it used?
• What are the disadvantages of using the payback method as a capital budgeting technique? What are the advantages? Why is it used so frequently?
• Why are differences in reported amounts for deferred taxes among the most frequent between the IFRS and the U.S., despite the fact that the two follow similar approaches for accounting for taxation?
• Why would a company switch to the LIFO method of inventory valuation in an inflationary period?
• a) How is depreciation expense handled when the direct method is used? b) How is depreciation expense handled when the indirect method is used?
• Define accelerated depreciation method.
• Explain why companies have negative cash flow from operations during the introductory phase?
• Explain the two reasons why the shorter the payback period the more attractive the investment is when the payback technique is used.
• Why is depreciation added back into net income?
• What are the advantages and disadvantages of using measures such as operating income before depreciation (OIBD) or earnings before interest, taxes, depreciation, and amortization (EBITDA) rather than
• Briefly explain the difference between tax payable method and tax effect accounting method, and state why the tax effect method is adopted under Australian Accounting Standards.
• How does the MACRS system differ from depreciation systems used for accounting (GAAP) purposes?
• Explain why an increase in cash during a particular accounting period does not necessarily mean that an entity has made a profit.
• Why does changing the depreciation method (i.e. changing the depreciation numbers in the financial statements) change the debt-to-equity ratio?
• Explain how to amortize bond discount or bond premium using the straight-line method.
• Why is the direct write-off method not considered to follow Generally Accepted Accounting Principles (GAAP)?