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.

---

Definitions:

Perfect Mobility

An economic condition where factors of production such as labor and capital can be easily moved across industries or geographies without costs or barriers.

Perfect Knowledge

A hypothetical situation in which all parties in the market have complete and absolute information about the market conditions and variables.

Variable Costs

Costs that change in proportion to the level of production or business activity.

Total Revenue

The total income generated by the sale of goods or services related to the company's primary operations.