What Is the Effect on the 2014 Financial Statements When

question 99

Multiple Choice

What is the effect on the 2014 financial statements when a capital expenditure during 2014 was incorrectly recorded as a repairs and maintenance expense?

• A) The financial statements are not affected.
• B) Assets and net income are both overstated.
• C)Assets are overstated and net income was understated.
• D)Assets and stockholders' equity are both understateD.Assets are understated because the expenditure should have been capitalized. Stockholders' equity is understated because net income is understated due to the expense overstatement.

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