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Nestle Pakistan has two conflicting objectives. Management wants to report the highest possible earnings to stockholders in the near future yet also wants to minimize the taxable income. Indicate the depreciation method that the company will probably use in its financial statements and its federal income tax return. Explain your answer with the reasons.

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Answer

Accelerated deprecation method will increase the earnings of stockholders and defer the tax liability to far future years and current tax liability will be minimum in near future.

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