In 20B,Gamma Company made an ordinary repair to a delivery truck at a cost of $300.Gamma's accountant debited the asset account,Delivery Vehicles.Was this treatment an error,and if so,what will be the effect on the financial statements of Gamma?
A)The repair was accounted for correctly.
B)The error increased assets and profit in 20B.
C)In the years following 20B,net income will be too high.
D)The error decreased profit in 20B.

Question

Quizplus · Accepted Answer

Ordinary repairs should be expensed, not capitalized. Debiting the asset account instead of an expense account increases assets and profit for the year.

In 20B,Gamma Company Made an Ordinary Repair to a Delivery