Why company uses accelerated depreciation methods-income tax

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Reference no: EM13256851

The following is a note accompanying a financial statement of International Paper Company:

Plant, Property, andEquipment

Plant, Properties, and Equipmentare stated at cost less accumulated depreciation. For financialreporting purposes, the company uses the units-of-production methodof depreciating its major pulp and paper mills and certain woodproducts facilities, and the straight-line method for other plansand equipment.

Annual straight-line depreciationrates for financial reporting purposes are as follows:

• Building2.5 % to 8%
• Machineryand Equipment 5% to 33%
• Woodsequipment 10% to 16%

Fortax purposes, depreciation is computed utilizing acceleratedmethods.

Required:

Are the depreciation methods used in the company's financial statements by current income tax laws? If not, who is responsible for selecting these methods?
Does the company violate the consistency principle by using differentdepreciation methods for its paper mills and wood productsfacilities than it uses for its other plan and equipment? If not,what does the principle of consistency mean? Explain
What is theestimated useful life of the machinery and equipment beingdepreciated with a straight-line deprecation rate of:
2. i. 5%
3. ii.33%
Who determines the useful lives over which specific assets are to be depreciated?
Why do you think the company uses accelerated depreciation methods for income tax purposes, rather than using the straight-line method?

Reference no: EM13256851

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