Crouch Apartments purchased an apartment building to rent to university students on December 15,2016.The tenants moved in on January 1,2017.On Super Bowl Sunday,a student punched a hole in the wall when his favorite team fumbled the ball.It cost the landlord $400 to repair the hole.How should this cost be recorded?

Question

Quizplus · Accepted Answer

The cost of $400 to repair the hole in the wall should be recorded as repair and maintenance expense. This is a normal operating expense incurred by the landlord and should be recorded as such. Option A is incorrect as it is not part of the asset account. Option C is incorrect as it is uncertain whether the tenants will pay for the damage or not. Option D is incorrect as materiality is subjective and should not be used to disregard expenses.

Crouch Apartments Purchased an Apartment Building to Rent to University