How Does the Recognition of Depletion Expense Affect the Elements

question 23

Multiple Choice

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.

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Definitions:

Ability-to-pay Philosophy

A principle of taxation that argues taxes should be levied according to a taxpayer's capacity to pay, focusing on fairness in the distribution of tax burdens.

Progressive Income Tax

A tax system where the tax rate increases as the taxable amount or income of the taxpayer increases.

Residential Property

Property designated for living or dwelling for individuals or families.

Regressive Tax

A tax system where the tax rate decreases as the taxpayer’s income increases, placing a higher relative burden on those with lower incomes.