What Is the Effect of the Adjusting Entry for Depreciation

question 129

Multiple Choice

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

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

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Definitions:

Average Total Cost

The sum of average variable costs and average fixed costs, or simply the total cost divided by the quantity of output produced.

Constant-Cost Industry

An industry in which the entry and exit of firms have no effect on the prices firms in the industry must pay for resources and thus no effect on production costs.

Resource Prices

The costs associated with acquiring the inputs or factors of production, such as labor, capital, and natural resources.

Output Increased

A scenario where production levels rise due to enhanced efficiency, greater demand, or improvements in labor and capital.