Question

Victory, Inc. expanded $3,000 on expenditures for ordinary repairs and maintenance on a piece of equipment....

Victory, Inc. expanded $3,000 on expenditures for ordinary repairs and maintenance on a piece of equipment. The company also expanded $6,500 on an equipment improvement that increased the equipment's economic usefulness in the future. What is the total dollar amount that will be capitalized as part of the equipment?

a. $5,000

b. $9,500

c. $0

d. $6,500

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Answer #2

Ordinary repairs and maintenance on a piece of equipment is a revenue expenditure immediately Expensed off. so it is charged to profit & loss account.

To qualify as capital expenditure it should improve the life expectancy of the asset or increase the productivity or increase the fair value of the asset.

The expenditure of $6,500 on equipment improvement should be capitalized because it increases the equipment's economic usefulness in the future.

The total dollar amount that will be capitalized as part of the equipment is $6,500

Option 'D' is correct

$6,500

answered by: anonymous
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