What is the effect on the 2014 financial statements when a capital expenditure during 2014 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.

Question

Quizplus · Accepted Answer

Assets are understated because the expenditure should have been capitalized. Stockholders' equity is understated because net income is understated due to the expense overstatement.

What Is the Effect on the 2014 Financial Statements When