Question

Last year Ace charged $1,469,867 Depreciation on the Income Statement of Andrews. If early this year Ace purchased a new depreciable asset, the effect on Andrews's financial statements would be (all other items remaining equal):

Answer 1

Answer:

Increase Net Cash from operations

Explanation:

Note that the purchase of another depreciable asset means that annual depreciation expense would increase( increase on the old asset which is $1,469,867 plus the depreciation on newly acquired asset), hence, assuming that net income remains the same as last year(the meaning of all other items remaining equal), when the amount of increased depreciation is added back to the net income in the cash flow statement, the amount of net cash flow from operations would increase compared to last year.

In essence, the correct option in this case is that there would be an increase in net cash from operations not just an increase in amount of asset in the balance sheet