Maximizing Tax Benefits with Depreciation
What benefit can Crystal Clear Communications gain from purchasing a new satellite?
A. inventory valuation
B. declining balance
C. appreciation
D. depreciation
Answer:
Depreciation
The correct answer is D. depreciation. Depreciation is the annual deduction of the cost of an asset over its useful life. Crystal Clear Communications recognizes the tax benefits of a lower net income provided by the annual depreciation of the satellite. By depreciating the cost of the satellite, the firm can reduce its taxable income and save money on taxes.
Depreciation:Depreciation is a valuable accounting method that allows businesses to spread the cost of an asset over its useful life. By recognizing depreciation expenses, a company can lower its taxable income, resulting in tax savings. This helps businesses like Crystal Clear Communications maximize their tax benefits and improve their financial performance.
Overall, depreciation plays a crucial role in financial management and tax planning for businesses. It is important for companies to understand how to use depreciation effectively to optimize their financial resources and achieve long-term success.