Thare Co. incurred the following costs related to trucks andvans used in operati

Question

Thare Co. incurred the following costs related to trucks andvans used in operating its delivery service:

1.      Change the oil and greased thejoints of all the trucks and vans.

2.      Installed security systems onfour of the newer trucks.

3.      Changed the radiator fluid on atruck that had been in service for the past four years.

4.      Installed a hydraulic lift to avan.

5.      Removed a two-way radio fromone of the trucks and installed a new radio with a greater range ofcommunication.

6.      Overhauled the engine on one ofthe trucks that had been purchased three years ago.

7.      Tinted the back and sidewindows of one of the vans to discourage theft of contents.

8.      Repaired a flat tire on one ofthe vans.

9.      Rebuilt the transmission on oneof the vans that had been driven 40,000 miles. The van was nolonger under warranty.

10. Replaced the trucks’ suspension system with a newsuspension system that allows for the delivery of heavierloads.

Classify each of the costs as a capital expenditure orrevenue expenditure.

Explanation / Answer

1. Revenue expenditure. 2. Capital expenditure 3.Revenue expenditure 4.Revenue expenditure 5.Revenue expenditure 6.Capital expenditure 7.Revenue expenditure 8.Revenue expenditure 9.Capital expenditure 10.Capital expenditure.

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