Question

"A company may depreciate equipment over 10 years on a straight-line basis for its financial statements, but might use an accelerated method of depreciation over a shorter time period on its income tax return?

True
False"

Answer 1

True. A company may depreciate equipment over 10 years on a straight-line basis for its financial statements, but it might use an accelerated method of depreciation over a shorter time period on its income tax return.

Step-by-step explanation:

True. A company may depreciate equipment over 10 years on a straight-line basis for its financial statements, but it might use an accelerated method of depreciation over a shorter time period on its income tax return.

This is because the financial statements are prepared for the purpose of reporting the company's financial position to shareholders and other stakeholders. Using a straight-line depreciation method evenly allocates the cost of the equipment over its useful life, which provides a more accurate representation of the company's financial performance.

On the other hand, the accelerated method of depreciation for income tax purposes allows the company to deduct a larger portion of the equipment's cost in the earlier years, which helps to reduce its taxable income and lower its tax liability.