Exeter Corporation Purchased a Piece of Equipment with a Price

question 169

Multiple Choice

Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2018.The amounts below are related to the equipment purchase.Match the items below and explain why each revenue expenditure is not capitalized.
-The company financed the equipment purchase with a bank loan.Interest of $3,000 was paid on the loan during 2018.

• A)This item should be included as part of the cost of the equipment.
• B)This item should be considered a revenue expenditure.

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Definitions:

Phobic Disorder

An anxiety disorder characterized by an intense, irrational fear of specific objects, activities, or situations leading to avoidance behavior.

Somatoform Disorder

Mental disorders characterized by physical symptoms without a clear physical cause, where symptoms are thought to be the manifestation of psychological conflicts or distress.

Conversion Reaction

A psychological response where emotional distress is expressed through physical symptoms.

Irrational Fear

A fear that is disproportionate to the actual danger posed, often a symptom of anxiety disorders.