At the end of the current accounting period, Ringgold Company recorded depreciation of $15,000 on its equipment. What is the effect of this event on the company's balance sheet?

Question

Quizplus · Accepted Answer

Depreciation is an expense that reduces the value of an asset over time. As a result, it reduces the value of the equipment's cost on the balance sheet. Since stockholders' equity is equal to assets minus liabilities, a decrease in assets will also decrease stockholders' equity. Therefore, the correct answer is B – decrease stockholders' equity and decrease assets.

At the End of the Current Accounting Period, Ringgold Company