Advanced, Inc., repaired a piece of equipment at a cost of $4,000, which Advance

Question

Advanced, Inc., repaired a piece of equipment at a cost of $4,000, which Advanced, Inc., paid in cash. Advanced, Inc., erroneously capitalized this cost as part of the cost of the equipment. Requirements 1. Journalize both the incorrect entry the accountant made to record this transaction and the correct entry that the accountant should have made. 2. How will this accounting error affect Advanced, Inc.'s net income? Ignore depreciation Record debits first, then credits. Exclude explanations from any journal entries) zing the incorrect entry that was made. Journal Entry Date Accounts Debit Credit

Explanation / Answer

1 Equipment 4000        Cash 4000 Repairs expense 4000        Cash 4000 2 Net income would be higher by $4000

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