Which of the Following Statements About Depreciation Is Correct

question 106

Multiple Choice

Which of the following statements about depreciation is correct?

• A)depreciation is subtracted from cost of goods sold to calculate net income.
• B)when depreciation expense is incurred, cash balances are reduced.
• C)depreciation expense does not affect net income.
• D)depreciation reduces the book value of assets.

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Definitions:

Actual Costs

Actual costs are the actual expenses incurred in the production or acquisition of goods and services, as opposed to estimated or budgeted costs.

Credit Balance

A balance that appears on the right side of an account, indicating that a company owes money or has a liability.

Process Cost Accounting System

An accounting system used to track and allocate costs of production by process or department, commonly employed in manufacturing environments with continuous, homogeneous outputs.

Product Quantity

The total number of units of a product that are produced, available for sale, or sold at a given time.