When an expenditure is made and it is treated as an expense but should have been capitalized, the resulting impact in the year of the expenditure would be: A.Assets would be overstated, net income would be understated. B.Both the assets and net income would not be affected. C.Assets would be understated, net income would be understated. D.Assets would be understated, net income would be overstated.

The expenses that are paid in advance are known as prepaid expenses.

Answered: When an expenditure is made and it is…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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When an expenditure is made and it is treated as an expense but should have been capitalized, the resulting impact in the year of the expenditure would be:

	A.	Assets would be overstated, net income would be understated.
	B.	Both the assets and net income would not be affected.
	C.	Assets would be understated, net income would be understated.
	D.	Assets would be understated, net income would be overstated.

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