Question

Current period depreciation expense is listed:

a. on the balance sheet.
b. in the investment section of the cash flow statement.
c. on the income statement.
d. on neither the balance sheet nor the income statement; it is a noncash expense.

Answer 1

Current period depreciation expense is reported on the income statement, where it affects net income by representing the portion of an asset's value that has been used up during the period. Option d

Step-by-step explanation:

The current period depreciation expense is recorded on the income statement. Depreciation is an allocation of the cost of an asset over its useful life and represents the amount of the asset's value that has been used up during the accounting period.

While depreciation is indeed a noncash expense, it still affects net income as it is a normal expense of doing business and is required by the matching principle -- matching expenses with revenues in the periods in which they are incurred to present an accurate representation of company profitability.

Consequently, the correct option for listing the current period depreciation expense is c. on the income statement. It is not listed on the balance sheet; however, the cumulative total of depreciation, known as accumulated depreciation, is presented on the balance sheet as a reduction from the gross amount of fixed assets.

The depreciation expense also impacts the cash flow statement indirectly by reducing taxable income, hence affecting cash flows from operating activities, but it is not listed in the investment section of the cash flow statement. Option d