Exeter Corporation Purchased a Piece of Equipment with a Price

question 149

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 purchased a three-year liability insurance policy to cover possible damage caused by the new equipment at a cost of $6,000.

• 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:

Producer Surplus

The disparity between the amount producers are prepared to take for a product or service and the amount they actually get.

Tariff Revenue

The income generated for a government from taxing imported goods.

Consumer Surplus

The gap between what consumers are prepared and capable of spending on a product or service versus what they actually spend.

Trade Restrictions

Measures such as tariffs, quotas, and import bans implemented by governments to control the amount and type of goods and services that can enter or leave a country.