Meadowlands, a for-profit skilled nursing facility, pays taxes at a rate of 40 p
ID: 2636712 • Letter: M
Question
Meadowlands, a for-profit skilled nursing facility, pays taxes at a rate of 40 percent. Assume Meadowlands recorded depreciation expense of $100,000 for the year that ended on December 31, 2012. If Meadowlands changed its method of calculating depreciation such that depreciation expense doubled for the year that ended on December 31, 2012, which of the following statements is(are) most correct?
Meadowlands' net income (after tax) for the year that ended on December 31, 2012, would increase by $100,000.Explanation / Answer
If depreciation expense doubled for the year , therefore depreciation expense would increase by $100,000
And hence cash flow will increase by $40,000 (100,000*40%)
..
Therefore , the answer is Meadowlands' estimated cash flow for the year that ended on December 31, 2012, would increase by $40,000.