The recognition of depletion expense
A)decreases assets and 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

Depletion expense reduces the value of the natural resource asset on the balance sheet, thus decreasing assets. It also reduces net income, which decreases equity. However, it is a non-cash expense and does not affect cash flow.

The Recognition of Depletion Expense