If the client fails to record disposals of property, plant, and equipment, both the original cost of the asset account and the net book value will be incorrect. What will the effect be of this misstatement on the original cost and the book value?
A) Both will be overstated indefinitely.
B) The original cost will be overstated indefinitely, and the net book value will be overstated until the asset is fully depreciated.
C) The original cost will be overstated indefinitely, and the net book value will be understated indefinitely.
D) The original cost will be overstated indefinitely, and the net book value will be understated until the asset is fully depreciated.

Question

Quizplus · Accepted Answer

If disposals are not recorded, the original cost of the asset account will not be reduced, leading to an overstatement of the original cost. On the other hand, the accumulated depreciation account will be correct, causing the net book value to be overstated until the asset is entirely depreciated. Therefore, Choice B is the right answer.

If the Client Fails to Record Disposals of Property, Plant