Question

Which of the following would be considered a capital expenditure?

A. Paying interest on a construction bond from previous periods
B. Paying city inspection fees for new equipment
C. Making lease payments on assets used during construction
E. Making a mortgage payment for a new building

Answer 1

B. Paying city inspection fees for new equipment

Step-by-step explanation:

Capital expenditure is an expense incurred by the business to maintain its fixed assets with an objective to increase its efficiency. Any additions and improvements in fixed assets is an capital expenditure.

City inspection is required to evaluate the working condition of the asset and any fees paid for it, is a capital expenditure.

Interest payment on construction bonds, lease rental payments of assets and mortgage interest on asset is a liability payable in intervals and all they are operating expense and not considered to be capital expenditure.