Ethics capitalizing vs. expensing assets [5 min]
Harrington Precision Parts repaired one of its Boeing 737 aircrafts at a cost of $150,000. Harrington Precision Parts erroneously capitalized this cost as part of the cost of the plane.
Requirements
1. How will this accounting error affect Harrington Precision Parts’ net income? Ignore depreciation.
2. Should the company correct the error or can it ignore the error to report more favorable earnings results?
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