Which of the Following Represents a Capital Expenditure

question 31

Multiple Choice

Which of the following represents a capital expenditure?

• A) issuing paychecks to workers
• B) paying for advertising on a local radio station
• C) purchasing raw materials to be used in the production of a firm's product
• D) purchasing a building to be used for office space

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Definitions:

Remote Contingent Liability

A potential financial obligation that is considered to be unlikely to occur; it is noted in financial statements as a footnote to provide full disclosure.

Accrual

A method of accounting that recognizes revenue and expenses when they are incurred, regardless of when cash transactions occur.

Disclosure

Disclosure involves the act of making new or important information known, especially about the financial or operational state of a company.

Current Assets

Assets that are expected to be converted into cash, sold or consumed within one year or within the normal operating cycle of the business, whichever is longer.