What Is the Effect of the Adjusting Entry for Depreciation

question 79

Multiple Choice

What is the effect of the adjusting entry for Depreciation expense?

• A) The entry increases total liabilities and increases total expenses.
• B) The entry increases total assets and increases total expenses.
• C) The entry decreases total assets and increases total expenses.
• D) The entry decreases total liabilities and increases total expenses.

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Definitions:

Cost of Goods Sold

The expenses directly linked to the manufacturing of the products a company sells, such as costs for materials and labor.

Work in Process Inventory

The expenses associated with goods that are still in the manufacturing stage, encompassing wages, raw materials, and indirect costs.

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including the cost of the materials used in creating the good along with the direct labor costs used to produce the good.

Income Statement

A financial report that shows a company's revenues, expenses, and net income over a specific period, indicating its profitability.