alleryStart learning →Why revalue when prices rise and depreciation uses old cost?
AIt overstates the cash balance held
BIt inflates profits and dividends
CIt raises the rate of income tax
DIt lowers the share premium reserve
Answer & Solution
Correct answer: B. It inflates profits and dividends
Charging depreciation on old cost understates the true cost of using the asset, so profits and dividends look too high.
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