Why is accelerated depreciation often favored for the corporation's set of tax books? It increases net accounting profits over the project's life. It allows the depreciation tax savings to be realized earlier. It increases the total depreciation tax shield over the project's life. It reduces the total amount of taxes paid over the project's life.

Question

Business

Dawson Clements

27 October, 15:50

Why is accelerated depreciation often favored for the corporation's set of tax books? It increases net accounting profits over the project's life. It allows the depreciation tax savings to be realized earlier. It increases the total depreciation tax shield over the project's life. It reduces the total amount of taxes paid over the project's life.

+1

Answers (1)

Know the Answer?

Caitlyn Calhoun · Answer 1

It allows the depreciation tax savings to be realized earlier

Explanation:

Because the time value of money, it is better to realize the tax saving earlier than later. The accelerated depreciation generates a higher depreication expense on the first periods. Because the first periods are the more fragile of the business, this tax shield becomes substancially more useful than the tax shield on the later periods.

It is important to notice that the total depreciation expense will be the same regardless of the depreciation method. It is only the time at which this expenses are distrubtes what changes.