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.
-The company financed the equipment purchase with a bank loan.Interest of $3,000 was paid on the loan during 2018.

Question

Quizplus · Accepted Answer

Interest on a loan used to finance a long-term asset is not considered part of the cost of the asset. It is considered a revenue expenditure because it is an expense that benefits the current period and does not increase the asset's future economic benefits.

Exeter Corporation Purchased a Piece of Equipment with a Price