Question

While reviewing the equipment account for errors, the chief accountant noted that the value of equipment has increased. The increase can be caused by:

i – A purchase of additional equipment

ii – An expenditure that is related to a routine maintenance

iii– An expenditure that extends the life of the equipment

iv – An expenditure that increases the equipment's productivity

Select one:

a. All of i, ii, iii and iv

b. i or ii only

c. i or iii only

d. i only

Answer 1

Answer c. I or iii only Notes: i- A purchase of additional equipment - Capital expenditure - Asset value Increased i - An expenditure that is related to a routine maintenance - Revenue Expenditure - Debited to Income Statement iii- An expenditure that extends the life of the equipment - Capital expenditure - Asset value Increased iv - An expenditure that increases the equipment's productivity - Revenue Expenditure - Debited to Income Statement Capital expenditure - Capital expenditure incured to purchase of assets, and costs related to taxes and transportation and insurance relating to purchase of equipment. And expenditure incured to extend life of the assets and useage of assets Revenue Expenditure - This expenditure incured in regular maintenance of assets, this expenses debited to income and expenditure account.