One of the criticisms mentioned in this chapter about the income statement is that it includes noncash items such as depreciation. Everything else held constant, what will be the effect of including depreciation when calculating the income statement versus just ignoring it?

a. Including depreciation will cause both the amount of taxes paid and the firm's net income to be higher than if depreciation were left out.

b. Including depreciation will cause both the amount of taxes paid and the firm's net income to be lower than if depreciation were left out.

c. Including depreciation will cause the amount of taxes paid to be higher and the firm's net income to be lower than if depreciation were left out.

d. Including depreciation will cause the amount of taxes paid to be lower and the firm's net income to be higher than if depreciation were left out.