Let's assume that Boeing builds a new military plane service building and they correctly capitalize this...

Let's assume that Boeing builds a new military plane service building and they correctly capitalize this as an asset called "Buildings." Let's also assume that Boeing has a new annual insurance policy on this building for $15,000 a year. Boeing incorrectly classifies this insurance policy spend as an asset. What is the impact of this error on Boeing's financial statements? (Be specific in your answer, and reference which statements are impacted and what accounts or totals may be over- or understated.)

Expert Solution

Building account (Asset) will be overstated (affect balance sheet)
Depreciation amount will be overstated (Depreciation expenses and accumulated depreciation expenses (overstated) (affects income statement and balance sheet)
Insurance expenses will be understated (affect income statement) overstates net income

ekkarill92 answered 2 years ago

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