Woods Company made an ordinary repair to a delivery truck at a cost of $500. Woods' accountant debited the asset account

Woods Company made an ordinary repair to a delivery truck at a cost of $500. Woods' accountant debited the asset account, Equipment. Was this treatment an error, and if so, what will be the effect on Woods' financial statements?

A) No, the repair was accounted for correctly.

B) Yes, the error overstated assets and net income.

C) Yes, in the years following, net income will be overstated.

D) Yes, the error understated net income.

Answer: B

The purchase of a new cooling system for $150,000 to upgrade an office building owned by the company would be accounted for as:

A) Goodwill.

B) An addition in the Buildings account.

C) An expense in the period of the purchase.

D) A patent.

Answer: B

Adding a refrigeration unit to a delivery truck that previously did not have this capability is an example of:

A) Repairs and maintenance.

B) Additions.

C) Improvements.

D) An expenditure that only benefits the current period.

Answer: B