Question

EFG Transportation Company uses the straight-line method to depreciate its delivery truck. Which of the following reflects how recognizing depreciation expense would affect the elements of the financial statements?
Assets=Liab.+Stk.EquityRev.−Exp.=Net Inc.Stmt of CashFlows
1.+ − NA NANA NA NANA
2.+ − NA NANA + −− OA
3.− NA −NA + −NA
4.+ + NANA NA NA− OA
a. Option 1
b. Option 2
c. Option 3
d. Option 4

Answer 1

Answer:

C.− NA −NA + −NA

Explanation:

As we know that

The depreciation expense is a non cash expense which is to be charged every year and shown in the income statement

Plus it also reduced the value of the asset and stockholder equity as a retained earning but at the same time it increases the expenses due to which the net income reduced and it does not have any impact on the cash flow statements

Hence, the appropriate option is c.