Question : 10) Required: Put an X in the appropriate box to : 1253281

 

10) Required: Put an X in the appropriate box to indicate the proper accounting treatment for each of the following payments:

 

Payment

Expense

Capitalize

Neither

Paid $6,700 cash for routine repairs designed to maintain the operating efficiency of an asset

 

 

 

Paid $23,000 to a creditor to satisfy a debt

 

 

 

Paid $9,000 to put a new roof on a warehouse

 

 

 

Purchased rights to a competitor’s trademark

 

 

 

Paid $4,500 to completely overhaul a factory machine’s engine, extending its useful life by 3 years

 

 

 

Purchased a new automated computer control system for the factory at a cost of $2,300,000

 

 

 

Paid $250 to tune up a home office air conditioner

 

 

 

Incurred a cost of $1,500,000 to build a new addition to an existing building

 

 

 

Paid $3,000 to change the rubber belts on factory equipment as part of normal monthly maintenance

 

 

 

Distributed cash to the owners as a dividend

 

 

 

 

 

11) Put an X in the appropriate box to identify each of these events as either a capital expenditure or an expense (revenue expenditure).

 

 

Capital Expenditure

Expense (Revenue Expenditure)

The company changed all the light bulbs in the home office.

 

 

The company cleaned the office carpets as part of normal monthly maintenance.

 

 

The company made the air conditioning system operate more efficiently by upgrading the thermostat.

 

 

The company purchased a new computer to replace an old computer.

 

 

The company replaced parts in machines and equipment as needed.

 

 

The company reengineered a major piece of equipment and made it last longer in the process.

 

 

The company changed the oil in the factory production equipment.

 

 

The company paved a parking lot outside the warehouse.

 

 

 

 

12) Put an X in the appropriate box to show whether each item is an expense, a capital expenditure, or neither:

 

 

Riteoff, Inc.:

Expense

Capital expenditure

Neither

1

paid $1,000 on its notes payable.

 

 

 

2

paid $12,000 for the painting of its building

 

 

 

3

paid $20,000 to an advertising agency for ads run during the year.

 

 

 

4

paid $5,000 for a URL address for its Web site.

 

 

 

5

paid $20,000 for a truck by issuing a 6%, 4-year note.

 

 

 

6

paid $200 for ordinary repairs to its equipment.

 

 

 

7

paid $1,000 for a rebuilt engine for its truck.

 

 

 

8

paid $60,000 to have an addition added to its building.

 

 

 

9

paid $2,000 of insurance premiums to cover the delivery of a new machine.

 

 

 

10

paid $1,000 for the electricity during the year to run its machines.