Question
Bridgeport Corp. reported net income of $55,750. Depreciation expense for the year was $121,500. The company calculates depreciation expense using the straight-line method, with a
Bridgeport Corp. reported net income of $55,750. Depreciation expense for the year was $121,500. The company calculates depreciation expense using the straight-line method, with a useful life of 10 years. Top management would like to switch to a 15-year useful life because depreciation expense would be reduced to $76,500. The CEO says, Increasing the useful life would increase net income and net cash provided by operating activities. Provide a comparative analysis showing net income and net cash provided by operating activities (ignoring other accrual adjustments) using a 10-year and a 15-year useful life. (Ignore income taxes.)
10-year life | 15-year life | |||
Net income | $ | $ | ||
Net cash provided by operating activities | $ | $ |
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