Question

Which of the following statements is TRUE about capital and revenue expenditures related to the long-term operating assets of a company?

A. A capital expenditure will either increase the life or the productivity of the operating asset.

B. A capital expenditure keeps an asset in its normal operating condition and is expensed as incurred.

C. A capital expenditure is treated as an operating expense on the income statement.

D. A revenue expenditure is treated as part of the cost of an asset.

E. Most capital expenditures will be small and immaterial.

Answer 1

A capital expenditure will either increase the life or the productivity of the operating asset.

Step-by-step explanation:

A capital expenditure will either increase the life or the productivity of the operating asset. This means that a capital expenditure is an investment made to improve or expand the existing assets of a company. It is not treated as an operating expense on the income statement, but is instead recorded as an asset on the balance sheet.

On the other hand, a revenue expenditure is an expense incurred to maintain or repair an asset in its normal operating condition. It is treated as part of the cost of an asset and is expensed as incurred.

Therefore, the correct statement is A. A capital expenditure will either increase the life or the productivity of the operating asset.