1.
Concept Introduction:
Capital and revenue expenditure: Capital expenditures are the expenditures that provide long-term benefits longer than the current period, whereas revenue expenditures are those expenditures that have been incurred to carry out day-to-day business. Capital expenditures are reported in the balance sheet and revenue expenditures are reported in the income statement.
The classification for the given expenditures into capital or revenue expenditure.
2.
Concept Introduction:
Capital and revenue expenditure: Capital expenditures are the expenditures that provide long-term benefits longer than the current period, whereas revenue expenditures are those expenditures that have been incurred to carry out day-to-day business. Capital expenditures are reported in the balance sheet and revenue expenditures are reported in the income statement.
The
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- a. Paid $50,000 cash to replace a motor on equipment that extends its useful life by four years. b. Paid $250 cash per truck for the cost of their annual tune-ups. c. Paid $200 for the monthly cost of replacement filters on an air-conditioning system. d. Completed an addition to a building for $281,250 cash. 1. Classify the above transactions as either a revenue expenditure or a capital expenditure. 2. Prepare the journal entries to record the four transactions from part 1. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Classify the above transactions as either a revenue expenditure or a capital expenditure. Transaction a b C D darrow_forwardIdentify the following expenditures as capital expenditures or revenue expenditures:a. Immediately after acquiring a new delivery truck, paid $195 to have the name of the store andother advertising material painted on the vehicle.b. Painted delivery truck at a cost of $450 after two years of use.c. Purchased new battery at a cost of $40 for two-year-old delivery truck.d. Installed an escalator at a cost of $17,500 in a three-story building that had been used for someyears without elevators or escalators.e. Purchased a pencil sharpener at a cost of $15.00. f. Original life of the delivery truck had been estimated at four years, and straight-line deprecia-tion of 25 percent yearly had been recognized. After three years’ use, however, it was decided to recondition the truck thoroughly, including adding a new engine.arrow_forwardIndigo Architecture made the following cash expenditures during its first year in operations: 1. 2. 3. 4. 5. 6. 7. 8. 9. (a1) Cost of real estate purchased as a plant site (land and building) Accrued property taxes paid at the time of the purchase of the real estate Cost of demolishing building to make land suitable for construction of a new building Architect's fees on building plans Excavation costs for new building Cost of filling and grading the land Full payment to building contractor Cost of parking lots and driveways Property taxes paid for the current year on the land Your answer is partially correct. $133,900 3,300 10,600 14,700 26,900 2.300 752,600 32,800 8,200 Record the above transactions. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. List all debit entries before credit entries.)arrow_forward
- 4-4 A government monument is expected to last forever. The first cost is $5,000,000. At the end of year 7 there will be a one-time remodeling cost of $300,000. At the end of every 12 years there will be a major remodeling cost of $500,000. Annual Operating & Maintenance Costs will total $15,000 for each year. i = 4% per year. a. Calculate the capitalized cost. b. Calculate the equivalent uniform annual cost (do not use the calculated capitalized cost in a.). c. Draw the fully labeled cash flow diagram.arrow_forwardPaid $78,000 cash to replace a motor on equipment that extends its useful life by four years. Paid $390 cash per truck for the cost of their annual tune-ups. Paid $312 for the monthly cost of replacement filters on an air-conditioning system. Completed an addition to a building for $438,750 cash. Classify the above transactions as either a revenue expenditure or a capital expenditure. Prepare the journal entries to record the four transactions from part 1.arrow_forwardCapital Expenditures and Revenue Expenditures Quality Move Company made the following expenditures on one of its delivery trucks: Mar. 20. Replaced the transmission at a cost of $6,345. June 11. Paid $915 for installation of a hydraulic lift. Nov. 30. Paid $49 to change the oil and air filter. Prepare the journal entries for each expenditure. If an amount box does not require an entry, leave it blank. Mar. 20 June 11 Nov. 30 heck My Work Previous Next All work saved. Save and Exit Submit Assignment for Gracarrow_forward
- community hospital in a rual community operates the ambulance service. the hospital purchases a new ambulance for $150,000. they estimate a useful life of 10 years and a salvage value of $20,000. what is the annual charge for depreciation on this asset?arrow_forwardIn an energy systems installation, following financial requirement was identified. Capital cost of equipment and installation - $ 150,000 Recurrent cost of maintenance Replacement of parts Life time of the system Income through energy generation i. iii. -$5,000 per year -$4,000 per year - 12 years - $ 22,000 per year Calculate the payback period of the system. If the scarp value of the equipment is $ 5,000, determine is the net profit expected to be collected for the investment? Explain how this profit is affected by "cost of money" or "interest". No calculations needed.arrow_forwardIdentify the following expenditures as capital expenditures or revenue expenditures. Immediately after acquiring a new delivery truck, paid$260 to have the name of the store and other advertising material painted on the vehicle. Painted delivery truck at a cost of $450 after two years of use. Purchased new battery at a c cost of $40 for two years old delivery truckarrow_forward
- 6.1 A project requires the purchase of new equipment at a cost of $12,000, which will be depreciated over the life of the asset. A further $8000 spent on transport and installation will be added to the purchase price of the equipment for depreciation purposes, and $1000 will be spent on advertising and other operating expenditure to get the project up and running. Excluding depreciation, what is the amount that will be claimed as a tax deduction in Year 1? a. $21,000 b. $1,000 c. $20,000 d. $9,000arrow_forwardFor each of the following transactions, state whether the cost would be capitalized (C) or recorded as an expense (E). A. Purchased a machine, $100,000; gave long-term note B. Paid $600 for ordinary repairs C. Purchased a patent for $45,300 cash D. Paid $200,000 cash for addition to old building E. Paid $20,000 for monthly salaries F. Paid $250 for routine maintenance G. Paid $16,000 for major repairsarrow_forwardOrion Flour Mills purchased a new machine and made the following expenditures: Purchase price $ 75,000 Sales tax 6,000 Shipment of machine 1,000 Insurance on the machine for the first year 700 Installation of machine 2,000 The machine, including sales tax, was purchased on account, with payment due in 30 days. The other expenditures listed above were paid in cash. Required: Record the above expenditures for the new machine.arrow_forward
- Principles of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College