Question

Talk Time Communications is considering the purchase of a new satellite. The firm believes the satellite will help generate future earnings. In addition, the firm recognizes the tax benefits of a lower net income provided by the annual ________ of the asset.
(1) inventory valuation
(2) declining balance
(3) depreciation
(4) appreciation

Answer 1

Answer:

(3) depreciation

Explanation:

Based on the information provided it seems that the firm recognizes the tax benefits of a lower net income provided by the annual depreciation of the asset. This refers to the decline in value of the asset, which in this case is the satellite, because of the continuous use that the asset is being given which causes it to wear down and not be worth the same as a brand new one.