Asked by MUHAMMAD SUFYAN on May 23, 2024
Verified
XYZ Co. incurred the following costs related to the office building used in operating its sports supply company:
(a)Replaced a broken window.(b)Replaced the roof that had been on the building 23 years.(c)Serviced all the air conditioners before summer started.(d)Replaced the air conditioners in the customer service areas.(e)Added a warehouse to the back of the building.(f)Repainted the interior walls.(g)Installed window shutters on all windows.
Classify each of the costs as a capital expenditure or a revenue expenditure.
Capital Expenditure
A type of spending undertaken by a business to acquire or upgrade physical assets such as property, industrial buildings, or equipment.
Revenue Expenditure
Expenses incurred during the normal course of business operations, which are consumed within the same accounting period.
Office Building
A structure designed and used primarily for the conduct of business and accommodative of administrative workers.
- Correctly distinguish between capital and revenue expenditures for costs associated with assets.
- Assess and jot down the financial implications of acquiring and enhancing permanent assets.
Verified Answer
(b) Capital expenditure
(c) Revenue expenditure
(d) Capital expenditure
(e) Capital expenditure
(f) Revenue expenditure
(g) Capital expenditure
Learning Objectives
- Correctly distinguish between capital and revenue expenditures for costs associated with assets.
- Assess and jot down the financial implications of acquiring and enhancing permanent assets.
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