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A firm chooses an accelerated method for tax purposes. Its motive is that

  • A.deferring tax is worth money in present worth terms
  • B.the total tax paid over the life is reduced
  • C.the asset's market value falls faster that way
  • D.reported profits in early years are increased

Answer: A

The same total is written off and the same total tax eventually paid, but paying later is cheaper measured today. Reported early profits are reduced rather than increased, which is why firms often keep two sets of schedules.

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