Question

An expenditure made in connection with a machine being used by an enterprise should be:

a. expensed immediately if it merely extends the useful life but does not improve the quality.

b. expensed immediately if it merely improves the quality but does not extend the useful life.

c. capitalized if it maintains the machine in normal operating condition.

d. capitalized if it increases the quantity of units produced by the machine.

Answer 1

The correct answer is D

Step-by-step explanation:

Expenditure is the funds which is used by organizations, firms or the corporations in order to attain the improve existing ones, new assets or the decrease the liability. In short, it is the use of the resource in the business operations.

So, when the expenditure is made on machine which is used by an enterprise need to be capitalized if it increase the quantity produced by the machine.