Depreciation expense on the income statement

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Reference no: EM131444739

When you buy a vehicle for dollar 10,000 dollars, on the balance sheet you would reduce cash by dollar 10,000 and increase Property, Plant & Equipment by dollar 10,000. If the vehicle depreciates by dollar2,000 in 2006, you would increase your Depreciation Expense on the Income Statement by dollar 2,000, thus reducing EBT by dollar 2,000. You would also increase Accumulated Depreciation by dollar 2,000, which of course reduces your Net Fixed Assets by dollar 2,000. However, now your Balance Sheet no longer balances. What TWO adjustments would you need to make in your Balance Sheet to make it balance? (Experiment with your Elvis Products, Inc. financial statements, and assume that the tax rate is still 40 percentage.)

Reference no: EM131444739

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