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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Capital and revenue expenditures

On February 14, Garcia Associates Co. paid $2,300 to repair the transmission on one of its delivery vans. In addition, Garcia paid $450 to install a GPS system in its van. Journalize the entries for the transmission and GPS system expenditures.

(a)

To determine

Capital expenditure: It refers to the amount spent on acquiring, maintaining, and improving the fixed assets that increases its productivity or extends useful life. It provides benefits in the future period.

Revenue expenditure: It refers to the amount spent on normal maintenance and repairs of fixed assets to generate revenue in the current period. It provides benefits only in the current period.

To journalize: the entry for the capital expenditure incurred for transmission.

Explanation

Record the journal entry for capital expenditure incurred for transmission.

Date Account Titles and Explanation Post Ref. Debit ($) Credit ($)
February 14 Accumulated Depreciation-Delivery Van                                                 ...

(b)

To determine

To journalize: the entry for the revenue expenditure incurred for installing a GPS System.

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