Island Industries inadvertently recorded a $5,000 betterment as an ordinary repair.Which of the following will occur as a result of this mistake?
A)Assets will be overstated by $5,000.
B)Assets will be understated by $5,000.
C)Net income will be overstated by $5,000.
D)Retained Earnings will be overstated by $5,000.

Question

Quizplus · Accepted Answer

Recording a betterment as an ordinary repair means the $5,000 was expensed rather than capitalized, leading to an understatement of assets.

Island Industries Inadvertently Recorded a $5,000 Betterment as an Ordinary