In 2013, 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 $250 cost incurred to repair damage done by a tenant should be recorded as repair and maintenance expense. This is because it is an expense incurred to maintain the company's rental property in a good and rentable condition. It should not be capitalized as part of the asset account, as it is not considered to increase the asset's future economic benefits. It is also not appropriate to not record the cost or consider it immaterial, as it is a legitimate expense that should be recognized in the company's financial statements.

In 2013, Fisher Apartments Purchased an Apartment Building to Rent