Which of the following costs related to the purchase of production equipment incurred by Newark Company during 2017 would be considered a revenue expenditure?
A)Installation costs for equipment
B)Purchase price of the equipment less the cash discount
C)Repair and maintenance costs during the equipment's first year of service
D)Transportation charges to deliver the equipment to Newark Company

Question

Quizplus · Accepted Answer

A revenue expenditure is an expense that is incurred to maintain or support the day-to-day running of the business and does not result in the creation of an asset that will benefit the company for a long period of time. The installation costs for equipment (A), purchase price of the equipment less the cash discount (B), and transportation charges to deliver the equipment (D) are all capital expenditures as they result in the creation of an asset that will benefit the company for a long period of time. Repair and maintenance costs during equipment's first year of service (C) are a revenue expenditure as they are incurred to maintain the equipment and keep it running efficiently during its first year of service.

Which of the Following Costs Related to the Purchase of Production