If an Expenditure Related to a Depreciable Asset Is Incorrectly

question 101

Multiple Choice

If an expenditure related to a depreciable asset is incorrectly treated as a capital expenditure,instead of as repairs and maintenance expense,which of the following statements is true?

• A)The current year's net income will be lower and future depreciation expense will be higher.
• B)The current year's net income will be higher and future depreciation expense will be lower.
• C)The current year's net income will be higher and future depreciation expense will be higher.
• D)The current year's net income will be lower and future depreciation expense will be lower.

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Definitions:

Personal Property Legislation

Laws and regulations governing the rights, ownership, and disputes of personal property, which is any movable property that is not fixed immovably to land.

Chattel Mortgage

A loan that is secured by movable personal property, such as a vehicle or mobile home, which the borrower can use while paying off the loan.

Debenture

A debt security issued by a corporation that may or may not have specific assets of the corporation pledged as security for payment.

Lien

With respect to goods, it is the right to retain the goods until payment is made.