S7-3. (Learning Objective 2: Distinguish a capital expenditure from an immediate

Question

S7-3. (Learning Objective 2: Distinguish a capital expenditure from an immediate expense) Identify each of the following items as either a capital expenditure (C), expense on the income statement (E), or neither (N): Type of Expenditure C Capital expenditure E Expensed on income statement N Neither capital expenditure or expensed I ransaction 1. Purchased a computer and peripheral 2. Paved a parking lot on leased property for 3. Repaired plumbing in main plant, paying 4. Purchased equipment for new equipment for $25,600 cash. $100,000. $150,000 cash. manufacturing plant, $5,000,000; financed 5. Paid $50,000 in cash for installation of 6. Paid $15,000 maintenance on equipment 7. Paid $150,000 to tear down old building 8. Paid dividends of $50,000. with long-term note. equipment in (4). in (4) during its first year of use. on new plant site. 9. Paid interest on construction note for new plant building, $$50,000. 10. Paid property taxes of $50,000 for the first year the new building is occupied.

Explanation / Answer

1.Capital Expenditure

2. Neither capital Expenditure or expensed

3. capital expenditure

4.capital Expenditure

5.capital expenditure

6 expesne on income statement

7.Neither capital Expenditure or expensed

8.Neither capital Expenditure or expensed

9.expesne on income statement

10.Neither capital Expenditure or expensed

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