How does the recognition of depletion expense affect the elements of the financial statements?
A)Decreases assets and stockholders' equity and decreases cash flow from investing expenses under the direct approach.
B)Decreases cash flow from operating activities,and does not affect the amount of total assets.
C)Increases assets,equity,and cash flow from operating activities.
D)Decreases assets and equity,and does not affect cash flow.

Question

Quizplus · Accepted Answer

Recognition of depletion decreases assets (the natural resource)and stockholder's equity (retained earnings).It increases expenses,which decreases net income.It does not affect cash flows.

How Does the Recognition of Depletion Expense Affect the Elements