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Caden LaFontaine
on Oct 28, 2024

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Gilbert Company made an ordinary repair to a delivery truck during 2019 at a cost of $500 and capitalized the repair cost.What is the effect on the 2019 financial statements as a result of the incorrect capitalization?

A) The financial statements are not affected.
B) Assets are understated and net income is overstated.
C) Assets are overstated and net income is overstated.
D) Assets and stockholders' equity are both understated.

Ordinary Repair

Expenditures to maintain the operating efficiency and expected productive life of an asset, treated as an expense.

Capitalization

The total value of all a company's outstanding shares of stock, calculated by multiplying the share price by the total number of shares.

Net Income

The total profit of a company after all expenses and taxes have been deducted from revenues.

  • Comprehend the consequences on financial statements due to incorrect accounting for costs related to depreciable assets.
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Evelyn FrecksNov 04, 2024
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