If a company classiﬁes an expenditure as a capital expenditure instead of a revenue expenditure, which of the following will be false?
A) Proﬁt for the year of acquisition will be higher.
B) The initial cost basis of the asset will be higher.
C) Depreciation expense will be higher over the asset's life.
D) It will be expensed in the year in which the expenditure takes place.

Question

Quizplus · Accepted Answer

Capital expenditures are capitalized, meaning they are added to the asset's cost basis and depreciated over the asset's useful life, rather than being expensed in the year of acquisition. Choices A, B, and C are true consequences of classifying an expenditure as a capital expenditure.

If a Company Classiﬁes an Expenditure as a Capital Expenditure