Piece of equipment and plans on depreciating

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Reference no: EM131211058

A company purchases a piece of equipment and plans on depreciating it using straight-line depreciation for financial statement purposes, and an accelerated method of depreciation for tax purposes. Taking this into consideration, which of the following is true for the first year of the equipment's depreciation?

A. This approach will reduce my net income as reported on the financial statements to investors and thereby reduce my taxes - a benefit to my investors.

B. Applying the two different depreciation methods above between book accounting and tax accounting will result in a deferred income tax liability.

C. The above scenario will result in a greater tax bill to me from the IRS

D. Recording the taxes due under the above scenario will require a debit to cash or taxes payable, and a credit to tax expenses and deferred taxes.

E. None of the above are true.

Reference no: EM131211058

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