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1. Identify the type of costs as either a capital or revenue expenditure for the

ID: 2457045 • Letter: 1

Question

1. Identify the type of costs as either a capital or revenue expenditure for the Martinez Company.

Martinez Company purchased a machine on January 1, 2014. In addition to the purchase price paid, the following additional costs were incurred.

Which costs listed below are capital expenditures? Select all that apply. (Points : 5)         sales tax paid on the purchase price
        transportation and insurance costs while the machinery was in transit from the seller
        annual city operating license
        personnel training costs for initial operation of the machinery
        lubrication of the machinery gearing after the machinery was placed into

        installation costs necessary to secure the machinery to the building flooring
        lubrication of the machinery gearing before the machinery was placed into service
        lubrication of the machinery gearing after the machinery was placed into service
        annual city operating license
        major overhaul to extend the life of the machinery

Question 2. 2. Identify the type of costs as either a capital or revenue expenditure for the Martinez Company.

Martinez Company purchased a machine on January 1, 2014. In addition to the purchase price paid, the following additional costs were incurred.

Which costs listed below are revenue expenditures? Select all that apply. (Points : 5)

Explanation / Answer

Capital Expenditure-All expenses related to the asset in putting the asset to the present location and condition are to be capitalised.

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Sales tax paid on the purchase price is a capital expenditure since it is a part of the purchase price.

Transport and insurance paid while the asset in transit

Revenue expenditure

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lubrication of the machinery gearing after the machinery was placed into service

annual city operating licence