Question

Brief Exercise 9-3 Indicate whether each of the following items is an operating expenditure or a capital expenditure. If the expenditure is neither, choose "Not Applicable". ཁྱི Repaired building roof, $1,500 E Purchased oil and gas for truck, $155 Replaced building roof, $27,500 Ô Replaced tires on truck, $500 སྤྱི Purchased building, $480,000 E Anticipated retirement costs for plant, $500,000 Purchased insurance on equipment in transit, $350 ཀྱི Added new wing to building, $250,000 z @ Purchased truck, $55,000 5 Painted interior of building, $6,500

Answer 1

Operating expenditure benefits in the current period or current operating cycle or it is the expenditure of normal day to day activities whereas capital expenditure benefits to more than one operating cycle or years. Based on the above statements, we will classify the given expenditures as operating or capital.

(a) Repaired building roof, $1500: Operating expenditure

(b) Replaced building roof, $27500: Capital expenditure

(c) Purchased building, $480000: Capital expenditure

(d) Purchased insurance on equipment in transit, $350: Capital expenditure

(e) Purchased truck, $55000: Capital expenditure

(f) Purchased oil and gas for truck,$155: Operating expenditure

(g) Replaced tyres on truck, $500: Capital expenditure

(h) Anticipated retirement costs for plant, $500000: Not applicable

(i) Added new wing to building, $250000: Capital expenditure

(j) Painted interior of building, $6500: Operating expenditure