A Company Replaced an Engine on a Vehicle and Debited

question 17

Multiple Choice

A company replaced an engine on a vehicle and debited the amount to Repairs and Maintenance expense, rather than debiting the Vehicle account. Which of the following would occur because of this error?

• A)Repairs expense would be understated.
• B)Net income would be overstated.
• C)Assets would be overstated.
• D)Assets would be understated.

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Definitions:

Compounded Semi-Annually

The process of calculating interest on both the initial principal and the accumulated interest over half-year periods.

Annual Rate of Appreciation

The rate at which an investment or real estate increases in value over a one-year period, expressed as a percentage.

Quarterly Compounded

Refers to the process of calculating and adding interest to the principal amount of an investment or loan on a quarterly basis.

Nominal Rate

The stated or advertised interest rate on a loan or investment, not accounting for any compounding of interest within that period.