Accounting Question

USA Discussion in 'Exams and Studying' started by greentext, Sep 17, 2018.

  1. greentext

    greentext

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    What is the effect on the Balance Sheet of adding $10 of depreciation, given a 40% tax rate? (Choose 1)

    Asked 5 MBA students this question and no one knew it....

    1. Retained Earnings decrease $10, Fixed assets decrease $10
    2. Retained Earnings increase $10, Fixed assets decrease $10
    3. Cash increases $6, Retained Earnings decrease $4, Fixed assets decrease $10
    4. Cash increases $4, Retained Earnings decrease $6, Fixed assets decrease $10
    5. No change
    6. Fixed assets increase $10
     
    greentext, Sep 17, 2018
    #1
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  2. greentext

    Becky Administrator

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    Is this a study question?
     
    Becky, Sep 18, 2018
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  3. greentext

    Steve-LevelUp VIP Member

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    You will need to work through the logic of each one. It will be a process of elimination. If this is a study question, then please attempt to eliminate the incorrect options and then if you can narrow it down and explain where why you cannot determine the correct answer, then we can help.
     
    Steve-LevelUp, Sep 18, 2018
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  4. greentext

    bklynboy VIP Member

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    Take a guess and add your logic. To me its an easy answer but curious how you think through the problem which helps you understand the rationale.

    Hint: its NOT number 5.
     
    bklynboy, Sep 18, 2018
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  5. greentext

    kirby VIP Member

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    Next time ask 5 accounting students :)
     
    kirby, Sep 18, 2018
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  6. greentext

    greentext

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    I am having trouble choosing between 1 and 4
     
    greentext, Sep 20, 2018
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