What is the effect on the 2010 financial statements when a capital expenditure during 2010 was incorrectly recorded as a revenue expenditure?
A)The financial statements aren't 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.

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 2010 Financial Statements When