What Is the Effect on the 2016 Financial Statements When

question 96

Multiple Choice

What is the effect on the 2016 financial statements when a capital expenditure during 2016 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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Definitions:

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