During the year, 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?

Question

Quizplus · Accepted Answer

The cost of repairing the damage done by a tenant should be recorded as a repair and maintenance expense. It is not part of the asset account since it was an expense incurred to maintain the asset, not to improve it. It should be recorded as an expense in the period incurred. It is not appropriate to not record it as it is material to the financial statements. Additionally, it may not be possible to charge the tenants for the damage, so it should be recorded as an expense regardless.

During the Year, Fisher Apartments Purchased an Apartment Building to Rent