Q3. Classify the following items as either revenue or capital expenditure: Repairs to a refrigeration system of a meat wholesaler.Repainting of the interior of a bar/restaurant which has greatly improved the potential for finding a buyer for the bar/restaurant as a going concern.Wages paid to employees who worked on the construction of their company’s new office building

Introduction: Revenue Expenditure: Expenditure spent for running day to day business operations…

Answered: Classify the following items as either…

Classify the following items as either revenue or capital expenditure: Repairs to a refrigeration system of a meat wholesaler.

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter10: Property, Plant And Equipment: Acquisition And Subsequent Investments

Section: Chapter Questions

Problem 19E

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Capital & Revenue Expenditure Consider the following list of expenses incurred by a company: Purchase of a motor car Claim for a meal Purchase of shares in a supplier Purchase of a new computer Payment for hotel accommodation Installation cost for server Purchase of raw materials Repair of motor vehicles Purchase of new stationery Payment of an insurance premium Wages Purchase of a new plot of land. Required: Examine this list and determine if each expense is revenue or capital expenditure. You are required to provide a short explanation for your choice.
(b) Classify the items listed below either as capital or revenue expenditure. Fittings partition in a new shop; Carriage on returns outwards; Cost of weighing machine in a retail shop; Repairs to office safe; Legal costs of collecting debts; Legal costs of building materials for a new office building; Carriage costs of building materials for a new office building; Purchase of an extra motor vehicle for distributor of soda and beer; Cost of paint for repainting the hospital wards from green to blue; Cost of paying for registration number plates of a new motor vehicle; Cost of replacing registration number plates of a motor vehicle;
(a) Explain clearly the difference between capital expenditure and revenue expenditure. (b) Classify the items listed below either as capital or revenue expenditure. Fittings partition in a new shop; Carriage on returns outwards; Cost of weighing machine in a retail shop; Repairs to office safe; Legal costs of collecting debts; Legal costs of building materials for a new office building; Carriage costs of building materials for a new office building; Purchase of an extra motor vehicle for distributor of soda and beer; Cost of paint for repainting the hospital wards from green to blue; Cost of paying for registration number plates of a new motor vehicle; Cost of replacing registration number plates of a motor vehicle;
Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank. Cost Product Cost/Period Cost1. Depreciation on chairs and tables in the factory lunchroom 2. The wages of the receptionist in the administrative offices 3. Cost of leasing the corporate jet used by the company's executives 4. The cost of renting rooms at a Florida resort for the annual sales conference 5. The cost of packaging the company's product
Classify the items listed below either as capital or revenue expenditure. Fittings partition in a new shop; Carriage on returns outwards; Cost of weighing machine in a retail shop; Repairs to office safe; Legal costs of collecting debts; Legal costs of building materials for a new office building; Carriage costs of building materials for a new office building; Purchase of an extra motor vehicle for distributor of soda and beer; Cost of paint for repainting the hospital wards from green to blue; Cost of paying for registration number plates of a new motor vehicle; Cost of replacing registration number plates of a motor vehicle;
State whether each of the below is Capital Expenditure or Revenue Expenditure. 1 Purchase of new delivery vehicle 2 Payment of an invoice for advertising 3 Costs of clearing the site ready for an extension to the factory building 4 Signwriting on the outside of the new delivery vehicles 5 Redecoration of the office 6 Payment of delivery driver’s wages 7 Fuel for delivery vehicles 8 Fitting of shelving in delivery vehicle 9 Clay for making the pets toys 10 Wages of sales staff 11 Purchase of potters wheel for use in the business 12 Installation costs for the potters wheel 13 Wages os staff operating the potters wheel 14 Redecoration of store room 15 Payment of extra wages to own staff for fitting the alarm and cctv 16 Payment of architect fees for designing the proposed new shop 17 Purchase of new telephones system for…
Suppose that you have been given a summer job as an intern at Issac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help finance its growth. The bank requires financial statements before approving the loan. Required: Classify each cost listed below as either a product cost or a period cost for the purpose of preparing financial statements for the bank. Costs Product Cost / Period Cost 1. Depreciation on salespersons’ cars. 2. Rent on equipment used in the factory. 3. Lubricants used for machine maintenance. 4. Salaries of personnel who work in the finished goods warehouse. 5. Soap and paper towels used by factory workers at the end of a shift. 6. Factory supervisors’ salaries. 7. Heat, water, and power consumed in the factory. 8. Materials used for boxing products for shipment overseas. (Units are…
Suppose that Demont has been given a summer job as an intern at Isaac Aircams, a company that manufactures sophisticated spy cameras for remote-controlled military reconnaissance aircraft. The company, which is privately owned, has approached a bank for a loan to help it finance its growth. The bank requires financial statements before approving such a loan. Classify each cost listed below as either product costs or period costs for the purpose of preparing the financial statements for the bank. Costs Product Cost/Period Cost 1. Depreciated on salesperson's cars 2. Rent on equipment used in the factory 3. Lubricants used for machine maintenance 4. Salaries of personnel who work in the finished goods warehouse 5. Soap and paper towels used by factory workers at the end of a shift
Explain what impact these errors would have hadover the last year and how you will correct them so you can prepare accurate financial statements.Expenditures:• Normal repair and maintenance on the manufacturing facility were capitalized.• The cost of taxes on new equipment used in business operations was expensed.• The shipping costs on new equipment used in business operations were expensed.• The cost of a minor repair on existing equipment used in business operations was capitalized.Assets:• Land next to the production facility held for use next year as a place to build a warehouse wasdepreciated.• Land held for future resale when the value increases was classified as Property, Plant, andEquipment but not depreciated.• Equipment used in the production process was classified as an investment.
Identify the following costs that could be capitalized on the firm’s balance sheet (included in property, plant, and equipment). New windshield wiper blades on the company’s truck New sidewalks in front of the firm’s factory Freight expenses for new equipment installed in the factory Installation costs for the new equipment Realtor’s fees associated with land purchase Minor engine repair on the truck Engine replacement on the truck Razing or demolishing a building on newly acquired land Design costs for a new building Value-added tax Construction expenses associated with building a garage Costs required to bring the equipment to its intended location Administration and other general overhead costs Idle capacity Wasted materials, labour and other resources
Which of the following items should be accounted for as a capital expenditure?a. The monthly rental cost of an office buildingb. Costs incurred to repair leaks in a building’s roofc. Maintenance fees paid with funds provided by the company’s capitald. Taxes paid in conjunction with the purchase of office equipment
Classify the following items as either revenue or capital expenditure: An extension to an office building costing £24,000. The cost of replacement valves on all the labeling machines in a canning factory. Repairs to the warehouse roof. Annual service costs for a courier firm’s fleet of vans. Replacement of rubber tread on a printing press with a plastic one that has resulted in the useful economic life of the printing press being extended by three years. A new bicycle purchased by a newsagent for use by the newspaper delivery boy. (g) Repairs to a refrigeration system of a meat wholesaler. (h)Repainting of the interior of a bar/restaurant which has greatly improved the potential for finding a buyer for the bar/restaurant as a going concern. (i) Wages paid to employees who worked on the construction of their company’s new office building