BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 10, Problem 10.5BPE
Textbook Problem

Capital and revenue expenditures

On August 7, Green River Inflatables Co. paid $1,675 to install a hydraulic lift and $40 for an air filter for one of its delivery trucks. Journalize the entries for the new lift and air filter expenditures.

Expert Solution
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 hydraulic lift installation.

To journalize: the entry for the revenue expenditure incurred for installing an air lifter.

Explanation of Solution

Record the journal entry for capital expenditure incurred for hydraulic lift installation.

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
August7Delivery Truck                                                  1,675
     Cash                1,675
(To record the capital expenditure incurred for installation.)

Table (1)

  • Delivery Truck is an asset and is increased due to the amount spent to install the hydraulic lift that improves the delivery truck’s productivity. Therefore, Delivery Truck account is debited with $1,675.
  • Cash is an asset and is decreased due to the expense paid in cash. Therefore, Cash account is credited with $1,675.

Record the journal entry for revenue expenditure incurred for installing an air lifter...

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Chapter 10 Solutions

Accounting
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