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Evergreen Mfg. is a rapidly growing company that acquires equipment every year. Evergreen uses straight-line depreciation in its financial statements and an accelerated method in
Evergreen Mfg. is a rapidly growing company that acquires equipment every year. Evergreen uses straight-line depreciation in its financial statements and an accelerated method in its tax returns. Identify all correct statements:
Using straight-line depreciation in the financial statements instead of an accelerated method reduces Evergreens reported net income.
Using straight-line depreciation in the financial statements instead of an accelerated method increases Evergreens annual net cash flow.
Using an accelerated method instead of straight-line depreciation in income tax returns increases Evergreens cash flow from operating activities.
As long as Evergreen keeps growing, it will probably report more depreciation in its income tax returns each year than it does in its financial statements.
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