Question

Problem H-3 Hb 302 SS 2020 Part 1 For each of the following purchases, does the purchase represent a capital or a revenue expenditure? a. Complete remodeling of a restaurant dining room at a cost of $80,000 b. Repainting the exterior of a delivery truck at a cost of $500 c. Purchase of a pizza oven at a cost of $18,000 d. Purchase of a dozen pencil sharpeners with a life of ten years at a total cost of $65. e. Overhaul of the engine on a tour bus at a cost of $5,000, edending the life of the bus by five years. f. Purchase of a computer system at a cost of $35,000 Part 2 Windswept Inns recently leased a building for ten years. Before opening the building for business, Windswept made $40,000 worth of improvements to the walls ceilings and carpeting. The life of the improvements is expected to be eight years. Required: Record the annual joumal entry for the amortization of the improvements.

Answer 1

capital expendituare palt. I These are expenditures for high value items that holds longes duration rearuisements, capital expenditures are long term expena team expenditures, Due to this the easining capacity in increases &e the useful life also increase Revenue expendituly Revenue expenditures are not high value items, instead they are scoutine expenditures that takes place in normal course of business. eg These expenditures maintains fixed assets. Earnings donot increase but stay mains revenue expenditure, a) complete de modelling of a restaurant dining roon at a cost of $80,000 capital expenditure b) Repainting the exterior of a delivery fuck at a cost of $ 500 - Revenue expenditure c) purchase of pizza oven at cost of $18000 O capital expenditur A pusschase of dozen pencil Sharpness with a life of royears at a cost of $65 - Revenue expenditure the on e) overhaul of loud of the engine on a tour bus at a cost of $5000, extending life by steareas capital expenditure purchase of Computer systems at cost of $30 capital expenditure f

past: 2 cost of imporovements = $ 40,000 Life of improvements : 8 years annual amostaation - $40000 -- $5oooper annum 15 Byeals journal entry for amortization of improvements amortization expense alcor $5000 to accumulated amortization being amostaation expense recognised by Clediting accumulated a moshidation ale) $5000 $5000 so S000 profit & loss al or to amortization expense ale (being amostaation expense charged as expense to profit & loss Alej