The equation Ending balance in retained earnings = Beginning balance in retained earnings + Net operating income Dividends highlights the connection between the balance sheet and income statement and recognizes the fact that net operating income is essentially embedded within retained earnings on the balance sheet. Which of the following is true?

1. Factory depreciation is recorded as a decrease in the Property, Plant, and Equipment column and as a decrease in the Retained Earnings column.
2. Factory utility costs paid in cash are recorded as a decrease in the Cash column and as an increase in the Manufacturing Overhead column.

		Only statement I is true.
		Only statement II is true.
		Both statements are true.
		Neither of the statements are true.