If a Company Classifies an Expenditure as a Capital Expenditure

question 42

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

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Definitions:

First-Order Autocorrelation

A statistical measure of the relationship between a variable's current value and its immediate previous value.

Durbin-Watson Test

A statistical method designed to identify the existence of autocorrelation with a single lag in the residuals resulting from a regression study.

Positive Autocorrelation

A statistical property of a series indicating that values close together in time are positively correlated and tend to move in the same direction.

Durbin-Watson Statistic

A statistical measure employed to identify autocorrelation within the residuals of a regression analysis.