A construction company purchased a piece of equipment with a price of $100,000 on March 1, Year 1. The amounts are related to the equipment purchase. Match the items and explain how each item should be accounted for. (Choices may be used more than once.)
-The company financed the equipment purchase with a bank loan.Interest of $3,000 was paid on the loan during Year 1.

Question

Quizplus · Accepted Answer

Interest paid on a loan is considered a revenue expenditure because it is a cost incurred during the normal operations of the business and is not directly tied to the acquisition cost of the equipment itself.

A Construction Company Purchased a Piece of Equipment with a Price