Identify the following expenditures as capital expenditures or revenue expenditures.Immediately after acquiring a new delivery truck, paid$260 to have the name of the store and other advertising material painted on the vehicle.Painted delivery truck at a cost of $450 after two years of use.Purchased new battery at a c cost of $40 for two years old delivery truck

Question
Asked Jul 25, 2019

Identify the following expenditures as capital expenditures or revenue expenditures.

  1. Immediately after acquiring a new delivery truck, paid$260 to have the name of the store and other advertising material painted on the vehicle.
  2. Painted delivery truck at a cost of $450 after two years of use.
  3. Purchased new battery at a c cost of $40 for two years old delivery truck

 

 

 

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Step 1

Expenditures: The useful life of the plant assets signifies the time period, that the company estimates the asset to be operationally effective, to be able to generate revenue. Thus, in order to maintain its smooth operational efficiency, the company may incur some expenses for repairing, installation of additional features or improvements during the life span of the asset, and it is reffered to as expenditure.

Step 2

Capital expenditures: These costs are incurred to extend the useful life, production capacity, and operating efficiency of the asset. These costs do not recur and are capitalized by increasing the cost of the asset on the balance sheet.

 

Revenue expenditures: These costs are incurred to maintain the long-term asset in good ...

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