Immediate expense or capitalize the purchase

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Reference no: EM13868243

ABC Corp. purchases equipment for $500,000 on account on July 1, 2014. Their fiscal year ends on December 31. If they Debit Equipment Expense for $500,000 and Credit Accounts Payable for $500,000, is this correct? Discuss why or why not, and, if not, what is the correct entry? Also, discuss the effects on the financial statements, specifically assets and net income under both scenarios. As a manager, what types of motivating factors would make you want to record it as an immediate expense or capitalize the purchase?

Reference no: EM13868243

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