Question

12. Given a profitable firm, depreciation:

Multiple Choice

Top of Form

increases net income.

increases net fixed assets.

decreases net working capital.

lowers taxes.

has no effect on net income.

15. Which one of the following will increase the cash flow from assets for a tax-paying firm, all else constant?

Multiple Choice

An increase in net capital spending

A decrease in the cash flow to creditors

An increase in depreciation

An increase in the change in net working capital

A decrease in dividends paid

16. If a firm has a negative cash flow from assets every year for several years, the firm:

Multiple Choice

may be continually increasing in size.

must also have a negative cash flow from operations each year.

is operating at a high level of efficiency.

is repaying debt every year.

has annual net losses.

18. What is the maximum average tax rate for corporations?

Multiple Choice

38 percent

25 percent

33 percent

39 percent

35 percent

32. Thorkfeld Company incurred depreciation expenses of $28,900 last year. The sales were $755,000 and the addition to retained earnings was $10,200. The firm paid interest of $6,200 and dividends of $5,000. The tax rate was 33 percent. What was the amount of the costs incurred by the company?

Multiple Choice

$691,013

$707,413

$704,700

$697,213

$719,900

35. Use the following tax table to answer this question:

Taxable Income					Tax Rate
$	0	-	9,525		10	%
	9,525	-	38,700		12
	38,700	-	82,500		22
	82,500	-	157,500		24
	157,500	-	200,000		32
	200,000	-	500,000		35
	500,000	+			37

Stacey’s Fabrics, a sole proprietorship earned $260,000 in taxable income for the year. How much tax does the company owe?

Multiple Choice

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$96,220

$91,000

$66,690

$62,400

$57,200

49. Sunny Disposition, Inc. has net working capital of $32,500, current assets of $59,000, equity of $74,500, and long-term debt of $42,500. What is the amount of the net fixed assets?

Multiple Choice

$58,000

$111,000

$94,600

$63,900

$84,500

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Bottom of Form

Answer 1

12)

Depreciation is a non cash expense. It is eligible for tax reduction and increases operating cash flows as there is no cash outlay for expenditure.

Hence, correct option is “lower taxes”