What is the impact on the income statement when a company writes down $100 in assets?

When a company writes down assets, it reflects a reduction in the value of those assets on the balance sheet, and this write-down is also recognized as an expense on the income statement. The correct answer indicates that net income decreases by $60, which aligns with the typical accounting treatment for asset write-downs.

This decrease in net income occurs because the write-down expense reduces the earnings of the company. In this scenario, if the write-down is categorized as an operating expense, it would directly lower the profits reported on the income statement.

The impact of the write-down on net income is important as it signals to stakeholders the necessity of reflecting the true economic value of the company's assets. In addition, when companies write down assets, they might be doing so to reflect more accurately their realizable value, which could also affect investment decisions and company valuation.

The other choices don't align with the effect of a write-down on the financial statements. For instance, asset value cannot increase from a write-down, revenues would not increase without an additional source of income, and cash flow from operations wouldn't inherently increase since a write-down does not generate cash; it merely reflects a non-cash expense. Thus, the correct understanding of this situation hinges on recognizing the write-down