Gilbert Company Made an Ordinary Repair to a Delivery Truck

Multiple Choice

Gilbert Company made an ordinary repair to a delivery truck during 2014 at a cost of $500 and capitalized the repair cost. What is the effect on the 2014 financial statements as a result of the capitalization?

A) The financial statements are not affected.
B) Assets are understated and net income is overstated.
C) Assets are overstated and net income is overstated.
D) Assets and stockholders' equity are both understateD.The repair should be expensed during 2014 rather than be capitalized. As a result, net income is overstated because expenses are understated. Assets are overstated because of the capitalization.