O'Hare Company, is a manufacturing firm that uses a job-order cost system to determine the costs of its products. During the current accounting period, O'Hare recognized depreciation of $600 on manufacturing equipment. Which of the following describes the effect of this event on the accounting equation?

Question

Quizplus · Accepted Answer

Depreciation expense reduces net income, which reduces equity. However, depreciation also reduces the book value of the manufacturing equipment, which reduces total assets. Therefore, total assets and total equity are both unaffected.

O'Hare Company, Is a Manufacturing Firm That Uses a Job-Order