A company purchases a new machine for $10,000 that it plans to use for 5 years. What is the impact on cash flow and on net income in YEAR 2? Group of answer choices A decrease of $2,000 to both net income and cash flow. An increase of $2,000 to net income and a decrease of $2,000 to cash flow. No impact on cash flow, a decrease of $2,000 to net income. None of the Answers is Correct. No impact to either net income nor cash flow.

A company purchases a new machine for $10,000 that it plans to use for 5 years. What is the impact on cash flow and on net income in YEAR 2? Group of answer choices A decrease of $2,000 to both net income and cash flow. An increase of $2,000 to net income and a decrease of $2,000 to cash flow. No impact on cash flow, a decrease of $2,000 to net income. None of the Answers is Correct. No impact to either net income nor cash flow.

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Description: A company purchases a new machine for $10,000 that it plans to use for 5 years. What is the impact on cashflow and on net income in YEAR 2? Group of answer choices A decrease of $2,000 to both net income andcash flow. An increase of $2,000 to net in

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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A company purchases a new machine for $10,000 that it plans to use for 5 years. What is the impact on cash
flow and on net income in YEAR 2? Group of answer choices A decrease of $2,000 to both net income and
cash flow. An increase of $2,000 to net income and a decrease of $2,000 to cash flow. No impact on cash
flow, a decrease of $2,000 to net income. None of the Answers is Correct. No impact to either net income
nor cash flow.

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