Question

Currently Abby is charged $2,798,933 Depreciation on the Income Statement of Andrews. Andrews is planning for an increase in this depreciation. On the financial statements of Andrews will this? Select: 1 Increase Net Cash from Operations on the Cash Flow Statement. Just impact the Balance Sheet. Decrease Net Cash from Operations on the Cash Flow Statement. Have no impact on the Net Cash from Operations as depreciation appears in both Cash Flow and the Income Statement.

Answer 1

The correct answer is Increase Net Cash from Operations on the Cash Flow Statement.

Step-by-step explanation:

Depreciation expense is a non-cash item in the statement of cash flows. Depreciation is charged on assets as a result of wear and tear and to match the revenue, the asset is used to generate against the depreciation expense over the life span of the asset.

Depreciation expense is usually added back to net income in the statement of cash flows, being a non-cash item. So, when the amount of the depreciation is increased, automatically, the net cash flows from operating activities would increase because that is the part of the cash flows that is affected by depreciation.