Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2015. The amounts below are related to the equipment purchase. Match the items below and explain why each revenue expenditure is not capitalized.
-The company financed the equipment purchase with a bank loan. Interest of $3,000 was paid on the loan during 2015.

Question

Quizplus · Accepted Answer

Interest paid on a loan is considered a revenue expenditure because it is a cost of financing, not a cost directly attributable to bringing the equipment to its intended use. Therefore, it is not capitalized as part of the equipment's cost.

Exeter Corporation Purchased a Piece of Equipment with a Price