Which of the following describes the effect of recording depreciation expense at year-end?
A)Net income decreases and total assets decrease.
B)Total assets decrease and stockholders' equity is not affected.
C)Net income decreases and total assets increase.
D)Stockholders' equity is not affected and net income decreases.

Question

Quizplus · Accepted Answer

Recording depreciation expense at year-end (assuming that the company uses the straight-line method) will reduce net income and decrease the carrying amount of the asset (i.e., decrease total assets). This is because depreciation expense represents the allocation of the cost of the asset over its useful life, and reduces the carrying value of the asset on the balance sheet.

Which of the Following Describes the Effect of Recording Depreciation