Indicate how each event affects the elements of financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Enter only one letter for each element.Increase = IDecrease = DNo Effect = NGulfshore Oil Company recognized $2,000,000 of depletion expense related to an oil reserve. How does this entry affect Gulfshore's financial statements?AssetsLiabilitiesEquityRevenuesExpensesNetIncomeCash Flow? ?????
What will be an ideal response?
(D) (N) (D) (N) (I) (D) (N)
Recognizing depletion expense decreases the oil reserve asset and increases expenses, which decreases net income and equity. It does not affect the statement of cash flows.
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