Crouch Apartments purchased an apartment building to rent to university students on December 15, 2015.The tenants moved in on January 1, 2016.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 repairing the hole in the wall should be recorded as repair and maintenance expense, as it is a normal business expense incurred to maintain the property in a good condition for rental purposes. It is not considered an asset, as it does not increase the property's value or extend its useful life. It should be expensed in the period in which it occurred, regardless of whether the tenants will be charged for the damage or if it is considered an immaterial amount.

Crouch Apartments Purchased an Apartment Building to Rent to University