Question 1

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE).
1.________ Repair of transmission or engine
2.________ Sales tax paid on the purchase price
3.________ Training of personnel for initial operation of machinery
4,________ Modification for new use

Accepted Answer

The answer of Classify each of the following expenditures as...

Question 2

Which of the following requires businesses to record depreciation?

Accepted Answer

The matching principle requires businesses to match the cost of assets over their useful lives, which is recorded as depreciation in the accounting records.

Question 3

Westin Delivery Service Company owns a delivery truck.Which of the following costs,associated with the truck,will be treated as a revenue expenditure?

Accepted Answer

Oil change and lubrication are regular maintenance expenses that are necessary to keep the truck in good working condition and ensure its continued operation. These costs would be considered revenue expenditures as they are incurred in the normal course of business to maintain the truck's current capacity.

B, C, and D would be considered capital expenditures as they involve significant additions, improvements, or alterations to the truck that increase its value, expand its capacity, or modify its use. These types of costs are generally capitalized and depreciated over time, as they provide benefits that extend beyond the current period.

Question 4

An asset is considered to be obsolete ________.

Accepted Answer

An asset is considered to be obsolete when a newer asset can perform the job more efficiently than the old asset can. This means that the asset may still have some useful life left or may not be fully depreciated, but it is no longer the most efficient option and should be replaced.

Question 5

If a company expenses an extraordinary repair,net income would be understated and the asset would be understated.

Accepted Answer

Extraordinary repairs should be capitalized, not expensed. Expensing them understates net income and the asset's value.

Question 6

The useful life of a plant asset is the length of the service period expected from the asset.

Accepted Answer

The useful life of a plant asset is defined as the estimated duration for which the asset can be used productively to generate income, whereas the service life is the actual period during which an asset is used in business operations. Therefore, the statement is true.

Question 7

An asset is considered to be obsolete when a newer asset can perform the job more efficiently.

Accepted Answer

Obsolescence refers to the process of becoming outdated or no longer useful. In the context of assets, an asset is considered obsolete when it can no longer effectively perform its intended function and there are newer assets available that can perform the job more efficiently.

Question 8

Newell Company has acquired land and paid $500 as a brokerage commission to acquire the land.However,the company's accountant has recorded the $500 as a revenue expenditure.What is the effect of this error?

Accepted Answer

The $500 brokerage commission paid to acquire the land should have been capitalized as part of the land's cost, not expensed. Recording it as a revenue expenditure means it was deducted from income, thus understating net income by $500.

Question 9

Freeman Company owns a delivery truck.Which of the following costs,associated with the truck,will be capitalized and depreciated?

Accepted Answer

Modifications for a new use are capitalized and depreciated because they increase the asset's useful life or productivity, unlike routine maintenance or repairs.

Question 10

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Accepted Answer

Capitalizing the payment means that the accountant classified it as a long-term asset instead of expensing it in the current period. This will cause assets to be overstated on the balance sheet, which will also affect the calculation of net income on the income statement since expenses would be lower. Therefore, net income will be overstated rather than understated if a payment that should have been recorded as a revenue expenditure has been capitalized.

Question 11

Estimated residual value is not depreciated because the company is guaranteed to receive this amount when the asset is sold.

Accepted Answer

Estimated residual value is not depreciated because the company expects to receive this amount at the end of the asset's useful life.

Question 12

Which of the following costs related to a business car would be capitalized?

Accepted Answer

The cost to install an engine with higher horsepower is capitalized because it improves the car's performance and extends its useful life, whereas the other costs are considered maintenance or repairs.

Question 13

Residual value is also known as depreciable cost.

Accepted Answer

Residual value is the expected value of a depreciable asset at the end of its useful life.

Question 14

Depreciation means that the business sets aside cash to replace an asset when it is used up.

Accepted Answer

Depreciation is the allocation of a plant asset's cost to expense over its useful life. Depreciation does not mean that the business sets aside cash to replace an asset when it is used up.

Question 15

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Accepted Answer

Capitalizing a payment that should have been recorded as a revenue expenditure means that the payment will be recorded as an asset rather than as an expense in the income statement. This will result in an overstatement of net income because the expenses will be lower and the assets will be higher than they should be.

Question 16

Depreciation is the allocation of a plant asset's cost to expense over its useful life.

Accepted Answer

Depreciation is the process of recognizing the cost of a plant asset as an expense over its useful life. This process helps to match the cost of the asset with the revenue that it generates over time.

Question 17

Provide definitions for the following terms.
1.Capitalize
2.Revenue Expenditure
3.Depreciation

Accepted Answer

The answer of Provide definitions for the following terms.
1.Capitalize
2.Revenue Expenditure
3.Depreciation...

Question 18

For each of the following expenditures,indicate whether the amount is debited to an asset account or to an expense account.
 $$\begin{array} { | l | l | } 
\hline \text { Transaction } & \text { Account Debited } \
\hline \text { Paint job } & \
\hline \text { Major engine overhaul } & \
\hline \text { Tire replacement } & \
\hline \text { Asset modified for new use } & \
\hline \text { Routine maintenance that keeps a machine in } & \
\text { normal operating condition } & \
\hline \text { Replacement of a roof } & \
\hline
\end{array}$$

Accepted Answer

The answer of For each of the following expenditures,indicate whether...

Question 19

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE).
1.________ Ordinary recurring repairs to keep the machinery in good working order
2.________ Major overhaul to extend the useful life of a vehicle by three years
3.________ Installation costs for a new machine
4.________ Painting

Accepted Answer

The answer of Classify each of the following expenditures as...

Question 20

Provide definitions for the following terms.
1.Depreciation
2.Extraordinary Repair
3.Property,Plant,and Equipment

Accepted Answer

The answer of Provide definitions for the following terms.
1.Depreciation
2.Extraordinary Repair
3.Property,Plant,and...

Quiz 10: Plant Assets,natural Resources,and Intangibles

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE). 1. Repair of transmission or engine 2. Sales tax paid on the purchase price 3. Training of personnel for initial operation of machinery 4, Modification for new use

Which of the following requires businesses to record depreciation?

Westin Delivery Service Company owns a delivery truck.Which of the following costs,associated with the truck,will be treated as a revenue expenditure?

An asset is considered to be obsolete ________.

If a company expenses an extraordinary repair,net income would be understated and the asset would be understated.

The useful life of a plant asset is the length of the service period expected from the asset.

An asset is considered to be obsolete when a newer asset can perform the job more efficiently.

Newell Company has acquired land and paid $500 as a brokerage commission to acquire the land.However,the company's accountant has recorded the $500 as a revenue expenditure.What is the effect of this error?

Freeman Company owns a delivery truck.Which of the following costs,associated with the truck,will be capitalized and depreciated?

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Estimated residual value is not depreciated because the company is guaranteed to receive this amount when the asset is sold.

Which of the following costs related to a business car would be capitalized?

Residual value is also known as depreciable cost.

Depreciation means that the business sets aside cash to replace an asset when it is used up.

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Depreciation is the allocation of a plant asset's cost to expense over its useful life.

Provide definitions for the following terms. 1.Capitalize 2.Revenue Expenditure 3.Depreciation

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE). 1. Ordinary recurring repairs to keep the machinery in good working order 2. Major overhaul to extend the useful life of a vehicle by three years 3. Installation costs for a new machine 4. Painting

Provide definitions for the following terms. 1.Depreciation 2.Extraordinary Repair 3.Property,Plant,and Equipment

Quiz 10: Plant Assets,natural Resources,and Intangibles

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE). 1.________ Repair of transmission or engine 2.________ Sales tax paid on the purchase price 3.________ Training of personnel for initial operation of machinery 4,________ Modification for new use

Which of the following requires businesses to record depreciation?

Westin Delivery Service Company owns a delivery truck.Which of the following costs,associated with the truck,will be treated as a revenue expenditure?

An asset is considered to be obsolete ________.

If a company expenses an extraordinary repair,net income would be understated and the asset would be understated.

The useful life of a plant asset is the length of the service period expected from the asset.

An asset is considered to be obsolete when a newer asset can perform the job more efficiently.

Newell Company has acquired land and paid $500 as a brokerage commission to acquire the land.However,the company's accountant has recorded the $500 as a revenue expenditure.What is the effect of this error?

Freeman Company owns a delivery truck.Which of the following costs,associated with the truck,will be capitalized and depreciated?

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Estimated residual value is not depreciated because the company is guaranteed to receive this amount when the asset is sold.

Which of the following costs related to a business car would be capitalized?

Residual value is also known as depreciable cost.

Depreciation means that the business sets aside cash to replace an asset when it is used up.

A company's accountant capitalized a payment that should have been recorded as a revenue expenditure.How will this error affect the company's financial statements?

Depreciation is the allocation of a plant asset's cost to expense over its useful life.

Provide definitions for the following terms. 1.Capitalize 2.Revenue Expenditure 3.Depreciation

Provide definitions for the following terms. 1.Depreciation 2.Extraordinary Repair 3.Property,Plant,and Equipment

Classify each of the following expenditures as capital expenditure (CE)or revenue expenditure (RE). 1. Repair of transmission or engine 2. Sales tax paid on the purchase price 3. Training of personnel for initial operation of machinery 4, Modification for new use