Question

Which of the following does not describe an expenditure that would be considered an asset improvement? a. routine cost to restore equipment to its ordinary operating condition after an accident b. install hardware that will increase the equipment's rate of output c. upgrade motor to decrease equipment's operating cost d. installation of a new battery system to allow for longer useful lives of office equipment

Answer 1

a. routine cost to restore equipment to its ordinary operating condition after an accident

Reason - Routine costs will only restorre the equipment to its ordinary condition and not result in any asset improvement.

All other options given in the question are considered an asset improvement as follows:

b. - Results in icrease in the equipment's rate of output which will in turn improve the asset's performance.

c. - Results in decrease in the equipment's operating cost which will increase the profits derived from the asset.

d. - Results in increased useful life of the equipment which is considered as an asset improvement.

Hence, only option-a does not describe an expenditure that would be considered as an asset improvement.