In 2012,Fisher Apartments purchased an apartment building to rent to university students.It cost the company $250 to repair damage done by a tenant to one of its units.How should this cost be recorded?
A)It should be recorded as part of the asset account.
B)It should be recorded as repair and maintenance expense.
C)It should not be recorded as the tenants will be charged for the damage.
D)It should not be recorded since this is an immaterial amount to the landlord.

Question

Quizplus · Accepted Answer

The cost of repairing the damage done by the tenant should be recorded as repair and maintenance expense. This is because it is an expense incurred by the company to maintain the property in a good condition for the next tenant. Recording it as an asset would imply that the company has increased the value of the property, which is not the case. Not recording it at all is also incorrect as it would lead to incomplete financial records, and not material to the landlord is not a valid reason for not recording an expense.

In 2012,Fisher Apartments Purchased an Apartment Building to Rent to University