Three companies have each recently made investments in equipment designed to save fuel. The equipment purchased by each company costs \(\$ 100,000\) and has a 10 -year service life. In all three cases, the company was entitled to a \(\$ 10,000\) investment tax credit when it purchased the asset during the current year. The income taxes otherwise payable of all three companies were reduced by \(\$ 10,000\) during the current year. In all three companies management had made careful studies of the costs and benefits of acquiring the new equipment.

Management of Company A decided that the equipment purchased would provide operating cost savings with a present value of \(\$ 150,000\). The company is delighted to acquire the asset.

Management of Company B decided that the equipment it purchased would provide operating cost savings with a present value of \(\$ 90,000\). The equipment was worth acquiring only because of the investment credit.

Management of Company \(\mathrm{C}\) decided that the equipment it purchased provided operating cost savings with a present value of \(\$ 94,000\). The equipment was acquired only because the investment credit made the investment worthwhile.

a Discuss the considerations management of each of these companies might give to accounting for the investment credit.

b What can you conclude from this question about the "right" method of accounting for the investment credit?