1. Ifa company classifies an expenditure as a capital expenditure instead of a r
ID: 2589069 • Letter: 1
Question
1. Ifa company classifies an expenditure as a capital expenditure instead of a revenue expenditure, which of the following will be true? A) Income for the year of acquisition will be higher. B) The initial cost basis of the asset will be higher. C) Depreciation expense will be higher over the asset's life. D) All of the above are true. 2. Which of the following methods ordinarily would be the most appropriate to determine depletion of natural resources for financial reporting purposes? A) Straight-line. B) Units of Production. C) Specific identification. D) 200 percent declining-balance. Use the following to answer questions 3 and 4 Cyclone Co uses the periodic inventory system. The following information about their inventory of Model X Mountain Bicycles is available: Transaction 4/12 7/8 9/22 Beginning Inventory Purchase Purchase Purchase 50 80 75 90 $800 $820 $840 S850 During the year, 235 bicycles were sold at a price of $1,500 each. Other operating costs equaled $80,000 and their tax rate is 30%. Round final answers to the nearest dollar 3. What was ending inventory and cost of goods sold on 12/31 under the FIFO cost flow assumption? A) S51,000 and $194,100 B) S48,200 and $196,900 C) $49,851 and $195,249 D) None of the above. 4. How much is gross margin under the FIFO method for the year ended 1231? A) S155,600 B) S157,251 C) S158,400 D) None of the above.Explanation / Answer
11. Option d :all of the above
Explanation:
When a capital expenditure wrongly treated as revenue expenditure , it affects expenditure,asset and depreciation accounts.
The initial journal entry overstated expenses and understates assets. So if correction take place then income for the year of acquisition will be higher, the initial cost basis of the assets will be higher. As after correction acquisition cost is greater, so depreciation expense will be higher over the asset life.
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