Chapter 8, Problem 5SE

Errors in accounting for long-term assets (Learning Objective 4) 5-10 min.

Noxon, Inc., repaired a piece of equipment at a cost of $3,000, which Noxon, Inc., paid in cash. Noxon, Inc., erroneously capitalised this cost as part of the cost of the equipment.

Requirements

1. 1. Journalise both the incorrect entry the accountant made to record this transaction and the correct entry that the accountant should have made.
2. 2. How will this accounting error affect Noxon, Inc.’s net income? Ignore depreciation.