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15. Assuming that YOU uses the same depreciation method for tax-reporting purposes, and that YOU reports the same revenues and expenses other than depreciation each year, YOU’s choice of depreciation method will most likely result in: A. higher operating cash flows than if straight line depreciation is used. B. a positive trend in income and net profit margin for the foreseeable future. C. the same company value as its value if it used the straight line depreciation method, since depreciation is a non-cash expense. 16. As a result of the change in useful life estimate, ELF’s income before taxes in 2010 will most likely: A. increase by $115,000. B. increase by $71,875. C. increase by $251,562. 17. With regards to impairment testing, ELF Products Inc. is most likely: A. not in compliance with U.S. GAAP, and as such, must test for impairment, identifiable intangible assets that are not amortized, at least annually. B. not in compliance with U.S. GAAP, and as such, must test for impairment, identifiable intangible assets that are not amortized, at least annually. C. in compliance with U.S. GAAP, and as such, are required to test for impairment, identifiable intangible assets that are not amortized only when events indicate that their carrying amount may not be recoverable. 18. Which of the following about the effect of changes in accounting methods on YOU’s financial statements is most accurate? A. If YOU allocated 35% of its depreciation expense to cost of sales, its gross margin and operating margin will increase B. After three years, if YOU’s financial statements are adjusted for capitalized software development costs, its reported income would increase C. After three years, if YOU’s financial statements are adjusted for capitalized software development costs, its reported income would decrease
C
