A company records 10000 depreciation expense which of the...

A company records $10,000 depreciation expense. Which of the following describes the effect on the balance sheet? A. Assets increase $10,000 and Equity increases $10,000. B. Assets increase $10,000 and Liabilities increase $10,000. C. Liabilities increase $10,000 and Equity decreases $10,000. D. Assets decrease $10,000 and Equity decreases $10,000. E. Assets decrease $10,000 and Liabilities decrease $10,000.

Transcript

00:01 In the given question, we need to find out net cash in flow from operating activity.

00:06 So first of all, we will be going on with the net income that we have been given and it's 20 ,000.

00:11 So putting those values.

00:13 So all the amounts are in dollars.

00:19 So we will be starting with the net income.

00:21 So we have been given with the net income.

00:24 So the company had a net income of $20 ,000.

00:32 Now with this, we will be doing some adjustment of the depreciation expense.

00:37 So, adjustment, since the depreciation expenses, non -cash expense, we have to add back the depreciation expense.

00:51 That is addition of the depreciation expenses and the amount that is given to us is $3 ,000.

01:02 So $3 ,000 is the depreciation expense that will be added back.

01:06 Now, after that, we will be doing the adjustment for changes in working capital.

01:12 Now when we do the cash flow with indirect method, what we are going to do is that with net income, first of all, we add the non -cash expenses like depreciation expense.

01:30 And thereafter, in the changes of working capital, what we do, if there is any decrease in current asset, this is to be added back.

01:40 This year refers to current asset.

01:43 Similarly, if there is any increase in current liability that will be added.

01:49 And if there is any increase in current asset that will be subtracted and if there is any decrease in current liability that will be subtracted...

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