Q. Gilbert Corporation had a gross income of $500,000 in tax year 1, $150,000 in salaries, $30,000 in wages, $20,000 in interest, and $60,000 in depreciation expenses for an asset purchased 3 years ago. Ajax Corporation has a gross income of $500,000 in tax year 1, and $150,000 in salaries, $90,000 in wages, and $20,000 in interest expenses. Apply the current tax rates and determine which of the following statements is correct.

• (A) both corporations will pay the same amount of income taxes in year 1.
• (B) both corporations will have the same amount of net cash flows in year 1.
• (C) ajax corporation will have a larger net cash flow than gilbert in year 1.
• (D) gilbert corporation will have a larger taxable income than ajax corporation in year 1.