If a capital expenditure is erroneously treated as a revenue expenditure, will the net income of the current year be over-stated or understated? Will this error have any effect on the net income reported in future years? Explain.

If a capital expenditure is erroneously treated as a revenue expenditure, will the net income of the current year be over-stated or understated? Will this error have any effect on the net income reported in future years? Explain.

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter12: Liabilities: Off-balance-sheet Financing, Retirement Benefits, And Income Taxes

Section: Chapter Questions

Problem 15Q

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Question

If a capital expenditure is erroneously treated as a revenue

expenditure, will the net income of the current year be over-
stated or understated? Will this error have any effect on the

net income reported in future years? Explain.

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