Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2018.The amounts below are related to the equipment purchase.Match the items below and explain why each revenue expenditure is not capitalized.
-Terms of the purchase were 2/10, net 30.Edison paid for the purchase on March 8.

Question

Quizplus · Accepted Answer

BThe discount taken advantage of by paying within the discount period (2/10, net 30) reduces the purchase price of the equipment, thus it should be included in the cost of the equipment (A). Any payment made within the discount period directly affects the cost basis of the asset. On the other hand, revenue expenditures are costs that are immediately charged against revenues in the period in which they are incurred. Since the scenario does not detail any specific revenue expenditures but focuses on the purchase and payment terms of the equipment, the correct application of the discount is a capital expenditure adjustment, not a revenue expenditure.

Exeter Corporation Purchased a Piece of Equipment with a Price