The Cost of Replacing the Engine on a Motor Vehicle

Multiple Choice

The cost of replacing the engine on a motor vehicle, which increased the vehicles' useful life by five years, was charged as an expense rather than being capitalised and added to the carrying amount of the vehicle. This error would result in profit being:

A) overstated, fixed assets would be understated and equity would be understated.
B) understated, fixed assets would be understated and equity would be overstated.
C) overstated, fixed assets would be overstated and equity would be overstated.
D) understated, fixed assets would be understated and equity would be understated.