A firm plans to depreciate a five year asset in the next planning period. The statements that will be directly affected immediately are the

Question

Quizplus · Accepted Answer

Depreciation is an expense item that affects both the pro forma income statement and the pro forma balance sheet. It reduces the net income on the income statement and lowers the value of the asset on the balance sheet. Therefore, the correct answer is D, which only includes the pro forma income statement and pro forma balance sheet. The cash budget and statement of retained earnings are not directly affected by the depreciation of the asset.

A Firm Plans to Depreciate a Five Year Asset in the Next