Failure to capitalize a fixed asset at the correct amount would impact which financial statements?
A) the balance sheet
B) the income statement
C) the cash flow statement only
D) both the income statement and the balance sheet

Question

Quizplus · Accepted Answer

Failure to capitalize a fixed asset at the correct amount would impact both the income statement and the balance sheet. On the balance sheet, the asset would be understated, leading to an understatement of total assets and owner's equity. On the income statement, the correct amount of depreciation would not be recorded, resulting in an understatement of net income.

Failure to Capitalize a Fixed Asset at the Correct Amount