What effect would such a policy change have on total assets

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Question :

Turnaround Ltd, which has been in business one year, has an income tax rate of 40%. The company makes it a practice to capitalise its advertising costs as a ‘deferred asset' and to amortise it at 25% per annum.

The accountant has suggested to the general manager that the policy of capitalising advertising should be ended because the economic bene?t of such expenditure is not clearly determinable. The amount of advertising capitalised this year was $150,000.

What effect would such a policy change have on Net Pro?t After Tax this year?

What effect would such a policy change have on total assets this year?

What effect would such a policy change have on cash flows from operations this year?

Reference no: EM132322087

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