The Cost of Replacing the Engine on a Motor Vehicle

question 26

Multiple Choice

The cost of replacing the engine on a motor vehicle, which increased the vehicles' useful life by five years, was charged as an expense rather than being capitalised and added to the carrying amount of the vehicle. This error would result in profit being:

• A) overstated, fixed assets would be understated and equity would be understated.
• B) understated, fixed assets would be understated and equity would be overstated.
• C) overstated, fixed assets would be overstated and equity would be overstated.
• D) understated, fixed assets would be understated and equity would be understated.

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Definitions:

Financial Performance

An assessment of how well a company can use assets from its primary mode of business and generate revenues.

Non-Financial Performance

Non-financial performance encompasses the qualitative aspects of a business's operations and success, such as customer satisfaction, employee morale, and brand reputation, which are not directly measured in monetary terms.

Critical Success Factors

The essential elements or conditions required for ensuring the success of an organization or a project.

Financial Performance Measures

Metrics used to assess a company's financial health and operational efficiency, such as net income, return on investment, and earnings per share.