Question

QUESTION 4

1. A capital expenditure results in a debit to:

   		an expense account
   		a contra-asset account
   		a liability account
   		an asset account

1 points   

QUESTION 5

1. The journal entry to record the amortisation of an intangible asset would require a debit to an expense account and a credit to:

   		An asset account.
   		A liability account.
   		A contra-asset account.
   		A revenue account.

Answer 1

Question 4

Note 1: What is Capital Expenditure?

Capital Expenditure is the money spent by a business or organization on acquiring or maintaining fixed assets, such as land, buildings, equipment, etc. E.g., Company X purchased Building for $100,000 in cash. The journal entry is:

Building A/c Dr. $100,000     To Cash A/c $100,000 (Purchased Building for Cash) Ans. The Correct Option is An Asset Account.

Question 5

Note2: What is Amortization of Intangible Assets?

Amortization of intangible assets refers to the expensing of the cost of intangible assets of a firm over the lifetime of those assets, such as patents, copyrights, trademarks, etc. E.g., Patents of Company X amortized at $10,000 annually. The journal entry is:

Amortization Expenses A/c   Dr. $10,000     To Accumulated Amortization A/c $10,000 (Patents amortized at $10,000) Ans. The Correct Option is a Contra Asset Account. (Since Accumulated Amortization is a contra asset and no further information is given about the option ‘an asset account’ whether it denotes Intangible assets or Tangible assets)