Answered

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A major addition to equipment should have been capitalized in the year 2021 but was incorrectly expensed. Which of the following is (are) true? Multiple Choice Income in 2021 is understated. Income in future years is overstated. Assets in 2021 are understated. All of these answer choices are true.

Sagot :

Parrain

Answer: All of these answer choices are true.

Explanation:

Income in 2021 will be understated because the equipment will be classified as expenses and expenses are deducted from income. Equipment should be capitalized to assets and had that been done, it wouldn't have reduced the net income.

Income in future years will be overstated because the equipment will not be depreciated seeing as it was treated as an expense. The depreciation expense that would have applied to it as an asset would not be deducted from net income thereby overstating it in future years.

Assets in 2021 will also be understated because the equipment was not added to it but was instead expensed.

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