If a company capitalizes a plant asset that should have been expensed:

Question

Quizplus · Accepted Answer

If a company capitalizes a plant asset that should have been expensed, expenses will be understated and net income will be overstated in the year of the error. This is because the cost of the asset should have been expensed in the current year, but instead, it was recorded as an asset, and its cost will be depreciated over several years, which will overstate net income in subsequent years.

If a Company Capitalizes a Plant Asset That Should Have