Question

Last year Aft charged $1,220,293 Depreciation on the Income Statement of Andrews. If early this year Aft purchased a new depreciable asset, the effect on Andrews's financial statements would be (all other items remaining equal):

Answer 1

Answer: No impact on Net Cash from operations.

Explanation:

There are three main sections in the cash flows statement and these are the operating activities which includes the cash transactions which has an effect on the net income; the investing activites which are the cash transactions that has to do with non-current assets and the financing activities which are the cash transactions that involves the non current liabilities and equity.

It should be noted that the purchase of the long-term assets is an investing activities. Therefore, the item will be recorded in the Investing activities in the cash flow statement.

There will be a reduction in cash while there'll be an increase in the fixed. The income statement is also affected due to the fact that there will be an increase in the depreciation expense that's recorded.

Therefore, there'll be no impact on the net cash from operations.