Financial statement effects of buying non-current assets
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Which accounts are affected by purchasing noncurrent assets?
Which accounts are affected by the utilization of (depreciation) noncurrent assets?
How are the income statement, balance sheet, and statement of cash flows affected by purchasing noncurrent assets?
How are the income statement, balance sheet, and statement of cash flows affected by the utilization of noncurrent assets?
What types of depreciation methods are available for a company to use when recording depreciation? How do these methods differ?
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The solution presents a discussion about the financial statement effects of purchasing non-current assets. This is a macro view of how certain financial statements change as a result of actions taken in the questions. It is a comprehensive response at over 600 words.
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? Which accounts are affected by purchasing noncurrent assets?
Non-current assets could include depreciable equipment plus amortizable intangibles, but both categories of assets affect only the balance sheet by reducing current assets (cash used to pay for the new non-current assets), or increasing current and long term liabilities (by using debt to buy the new assets). Think debit non-current asset, and credit either cash or debt.
? Which accounts are affected by the utilization of (depreciation) noncurrent assets?
The entry to record depreciation would increase depreciation expense and increase accumulated depreciation, a contra account to fixed assets. Amortization would produce the same effect: increase to amortization expense and an increase to accumulated amortization. Think debit expense and credit a contra asset account.
? How are the income statement, balance sheet, and statement of cash flows affected by purchasing noncurrent ...
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