If a Company Classifies an Expenditure as a Capital Expenditure

question 40

Multiple Choice

If a company classifies an expenditure as a capital expenditure instead of a revenue expenditure, which of the following will be false?

• A) Profit for the year of acquisition will be higher.
• B) Depreciation expense will be higher over the asset's life.
• C) It will be expensed in the year in which the expenditure takes place.
• D) The initial cost basis of the asset will be higher.

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Definitions:

Demand Period

A specific timeframe during which the demand for a product or service is assessed or observed.

Conditions Accepted

Terms that have been agreed upon by all parties involved in a transaction or agreement.

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total net benefit to society from the production and consumption of goods or services.

Car's Stereo

An audio system installed in an automobile that plays music or broadcasts from various sources, enhancing the driving experience.