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Exam Code: C_ARP2P_2105

Exam Name: SAP Certified Application Associate - SAP Ariba Procurement

Version: V15.35

Q & A: 208 Questions and Answers

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NEW QUESTION: 1
A company is considering making material adaptations to its warehouse and equipment. These costs will be $25,000,000 and will have a benefit period of 10 years. The income tax rate during this period will be 30%. The company is considering the effects of capitalizing the costs versus expensing the cost. In year one, which of the following would be true concerning post-tax income?
A. The expensing would have $22,500,000 less in net income
B. The expensing would cause $15,750,000 less in net income.
C. The expensing would cause $25,000,000 less in net income.
Answer: B
Explanation:
In the first year, expenses would be $25,000,000 if the costs were expensed. If costs were capitalized, expenses would be $2,500,000 ($25,000,000/10). The difference in the expenses is
$ 22,500,000, before the tax effect, and $15,750,000 after taxes ($22,500,000 x .7). If the costs were expensed in the first year, net income would be $15,750,000 less.

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