First, on the Income Statement, the $100 write-down shows up in the Pre-Tax Income line. With a 40% tax rate, Net Income declines by $60.
On the Cash Flow Statement, Net Income is down by $60 but the write-down is a noncash expense, so we add it back - and therefore Cash Flow from Operations increases by $40.
Overall, the Net Change in Cash rises by $40.
On the Balance Sheet, Cash is now up by $40 and an asset is down by $100 (it's not clear
which asset since the question never stated the specific asset to write-down). Overall, the
Assets side is down by $60.
On the other side, since Net Income was down by $60, Shareholders' Equity is also
down by $60 - and both sides balance.
8th EditionN. Gregory Mankiw
9th EditionN. Gregory Mankiw
6th EditionN. Gregory Mankiw