Question

Classify the following as either a revenue or a capital expenditure.

a. Paid $40,000 cash to replace a motor on equipment that extends its useful life by four years.
b. Paid $200 cash per truck for the cost of their annual tune-ups.
c. Paid $175 for the monthly cost of replacement filters on an air-conditioning system.
d. Completed an addition to a building for $225,000 cash.

Answer 1

Answer and Explanation:

The capital expenditure is the expenditure which is held for a capital asset i.e fixed assets for improving life, production, etc. It is a one-time expenditure

While on the other hand the revenue expenditure is the expenditure which is incurred on daily basis i.e frequently like repairs, maintenance

So based on the above, the classification is as follows

a. Capital expenditure

b. Revenue expenditure

c. Revenue expenditure

d. Capital expenditure