Connect Lines Co. incurred the following costs related to trucks and vans used i

Question

Connect Lines Co. incurred the following costs related to trucks and vans used in operating its delivery service:
1. Replaced a truck’s suspension system with a new suspension system that allows for the delivery of heavier loads.

2. Installed a hydraulic life to a van.

3. Repaired a flat tire on one of the vans.

4. Overhauled the engine on one of the trucks purchase three years ago.

5. Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication.

6. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty.

7. Changed the radiator fluid on a truck that had been in service for the past four years.

8. Tinted the back and side windows of one of the vans to discourage theft of the contents.

9. Changed the oil and greased the joints of all the trucks and vans.

10. Installed security systems on four of the new trucks.

Classify each of the costs as a capital expenditure or a revenue expenditure.

Thank you!

Explanation / Answer

First we observe the definition according to the definition we mark revenue or capital expenditure

Capital expenditure

Funds used by a company to acquire or upgrade physical assets such as property, industrial buildings or equipment. This type of outlay is made by companies to maintain or increase the scope of their operations. These expenditures can include everything from repairing a roof to building a brand new factory.

Revenue expenditure

Outlay benefitting only the current year. It is treated as an expense to be matched against revenue. An example is a tune-up of a car that has a period of benefit of one year or less. Repairs expense is charged.

1.       Capital (Increase in its performance)

2.       Capital (Increase in its performance)

3.       Revenue (Maintenance)

4.       Revenue(Maintenance) Overhauled means To examine or go over carefully for needed repairs                                                                                                                                                                                                                                            

5.       Capital (Increase in its performance)

6.       Revenue (Maintenance)

7.       Revenue (Maintenance)

8.       Revenue(Maintenance)

9.       Revenue (Maintenance)

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