Focus Company's accounting manager decided to start capitalizing the company's routine repairs and maintenance expense,starting in 2011.What effect will this change have on the company's 2012 income and assets respectively?

Question

Quizplus · Accepted Answer

Capitalizing routine repairs and maintenance expenses will overstate income because these expenses are not deducted from revenue, leading to higher reported profits. It will also overstate assets because these expenses are added to the asset's book value instead of being expensed immediately.

Focus Company's Accounting Manager Decided to Start Capitalizing the Company's