Question

A company wishes to report the highest earnings possible for financial reporting purposes.

Therefore, when calculating depreciation:
a. It will follow the MACRS depreciation tables prescribed by the IRS.
b. It will select the shortest lives possible for its assets.
c. It will select the lowest residual values for its assets.
d. It will estimate higher residual values for its assets.

Answer 1

d. It will estimate higher residual values for its assets.

Step-by-step explanation:

The depreciation is calculated on the value of the asset to be depreciated in the life of the asset that is cost - Salvage or residual value.

Thus, when the residual value is high then the amount to be depreciated will be low.

Then no matter whatever the method of depreciation be: the value of depreciation expense in dollars will be ultimately.

This will help in showing the highest earnings whatever the circumstance be.

Thus correct option is D.