When the purchase of a material seven-year depreciable asset is recorded by debiting an expense account, which one of the following statements is correct?
A) It is a self-correcting error and no adjustment is necessary.
B) The error will eventually self-correct, but the financial statements will be in error for seven years.
C) If the company uses a rapid depreciation method, the error will self-correct quickly so no adjustment is necessary.
D) Since it affects only the income statement, no adjustment is required.

Question

Quizplus · Accepted Answer

The error will affect the financial statements for seven years because the asset should be capitalized and depreciated over its useful life, not expensed immediately.

When the Purchase of a Material Seven-Year Depreciable Asset Is