Question

The expected costs to make replacements, alterations, or improvements to a building that materially prolong its life and increase its value is referred to as vacancy losses. collection losses. capital expenditures. operating expenses.

Answer 1

Capital expenditures

Explanation:

The major difference between capital and revenue expenditures are usually seen by certain variables such as; the amount spent, frequency of the spend and whether the spend expands or improves the earning capacity, functionality or operating efficiency of the asset under consideration.

For example, if the money spent on this building was just for painting and it is something that occurs every other year, then the amount spent would be referred to as operating expense.

In the question above, the money spent on the building does the following; materially prolong its life,increase its value. It is evident from these that such expense can be classified as capital expenditure.

Furthermore, this kind of expenditure cannot be carried out every year.

I hope this answer clears your doubt and improves your understanding of what is required.