Which of the following is/are TRUE?
I. The cash flow from operations are higher when expenses are capitalized.
II. Total cash flows are higher when the expenses are capitalized.
III. Capitalization of interest costs leads to higher net income.
IV. Capitalization of interest costs is not allowed under GAAP.
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A. B. C. D.D
While CFO is lower under expensing since the entire cash expense is charged against it, expensing leads to a lower total income, causing lower tax payments.
Hence, total cash flows are higher under expensing.