Question

What is the effect on the financial statements of recording depreciation on​ equipment? A. Net income and assets are​ decreased, but​ stockholders' equity is not affected. B. Assets are​ decreased, but net income and​ stockholders' equity are not affected. C. Net income is not​ affected, but assets and​ stockholders' equity are decreased. D. Net​ income, assets, and​ stockholders' equity are all decreased.

Answer 1

Answer: The answer is "D. Net​ income, assets, and​ stockholders' equity are all decreased.".

Explanation: This happens because the recording of the depreciation of equipment reflects the loss of value of the asset, which is a negative result that impacts the results, the value of the assets, and as a consequence in the stockholders' equity.