If the Cost of Replacing the Engine on a Motor

Multiple Choice

If 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, profit would be:

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