Question

Cook Co. incurred the following costs related to the office building used in operating its sports supply company: Select each of the costs as a capital expenditure or a revenue expenditure. For those costs identified as capital expenditures, classify each as an additional or replacement component. If the cost is identified as a revenue expenditure, choose "not applicable" in the second dropdown. a. Replaced a broken window. b. Replaced the roof that had been on the building for 23 years. c. Serviced all the air conditioners before summer started. d. Replaced the air conditioners with refrigerated air conditioners in the customer service areas. e. Added a warehouse to the back of the building. f. Repaint the interior walls. g. Installed window shutters on all windows.

Answer 1

a.Capital expenditure, replacement component

b.Capital expenditure, replacement component

c.Revenue Expenditure, not applicable

d.Capital expenditure, replacement component

e.Capital expenditure, additional

f.Revenue Expenditure, not applicable

g.Capital expenditure, additional

Step-by-step explanation:

Capital Expenditure involve the addition or replacement on assets that increases flows of economic benefits or Income earning capacity.

Revenue Expenditure involve repairs or maintenance of assets in order to maintain the ability to earn income or economic benefits and not to increase it.