The cost of a plant asset did NOT include installation costs that were expensed. This error would cause:

Question

Quizplus · Accepted Answer

Installation costs for a plant asset should be capitalized as part of the asset's cost rather than expensed. Failing to capitalize these costs results in the period's net income being understated because expenses are higher than they should be. Additionally, the asset's value on the balance sheet is understated because the installation costs were not included in the asset's recorded cost.

The Cost of a Plant Asset Did NOT Include Installation