An increase in the depreciation expense will do which of the following?
I.increase net income
II.decrease net income
III.increase the cash flow from assets
IV.decrease the cash flow from assets
A)I only
B)II only
C)I and III only
D)II and III only
E)II and IV only

Question

Quizplus · Accepted Answer

An increase in depreciation expense will decrease net income because depreciation is an expense that reduces the taxable income. However, it will increase the cash flow from assets because depreciation is a non-cash charge, which means it reduces net income but does not involve an actual outflow of cash, thereby increasing cash flow.

An Increase in the Depreciation Expense Will Do Which of the Following