An Expenditure Made in Connection with a Machine Being Used

question 125

Multiple Choice

An expenditure made in connection with a machine being used by an enterprise should be

• A) expensed immediately if it merely extends the useful life but does not improve the quality.
• B) expensed immediately if it merely improves the quality but does not extend the useful life.
• C) capitalized if it maintains the machine in normal operating condition.
• D) capitalized if it increases the quantity of units produced by the machine.

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Definitions:

Selling Price

The amount of money a buyer pays to acquire a product or service from a seller.

Markup Percent

A percentage added to the cost price to determine the selling price.

Cost

Cost refers to the amount of money or resources expended to obtain a good or service, including production, materials, labor, and other expenses.

Markup Percent

The percentage increase applied to the cost price of goods to calculate their selling price.