Question

In: Accounting

Jackie Fox owns and operates Platinum Transport Co. During the past year, Jackie incurred the following...

Jackie Fox owns and operates Platinum Transport Co. During the past year, Jackie incurred the following costs related to an 18-wheel truck:

Classify each of the costs as a capital expenditure or a revenue expenditure.

Costs Classification
1. Changed engine oil.
2. Installed a television in the sleeping compartment of the truck.
3. Installed a wind deflector on top of the cab to increase fuel mileage.
4. Modified the factory-installed turbo charger with a special-order kit designed to add 50 more horsepower to the engine performance.
5. Replaced a headlight that had burned out.
6. Replaced a shock absorber that had worn out.
7. Replaced fog and cab light bulbs.
8. Replaced the hydraulic brake system that had begun to fail during his latest trip through the Rocky Mountains.
9. Removed the old radio and replaced it with a new communications module.
10. Replaced the old radar detector with a newer model that is fastened to the truck with a locking device that prevents its removal.

Solutions

Expert Solution

Explanation:

1) Capital Expenditure:

Thoes expenditure which are incurred in order to maintain and improve the fixed asset to increase the productivity and useful life.

2) Revenue Expenditure:

Those expense which incurred in order to maintain and repair fixed asset to earn revenue in current period.

Costs Classification
1. Changed engine oil. Revenue
2. Installed a television in the sleeping compartment of the truck. Capital
3. Installed a wind deflector on top of the cab to increase fuel mileage. Capital
4. Modified the factory-installed turbo charger with a special-order kit designed to add 50 more horsepower to the engine performance. Capital
5. Replaced a headlight that had burned out. Revenue
6. Replaced a shock absorber that had worn out. Revenue
7. Replaced fog and cab light bulbs. Revenue
8. Replaced the hydraulic brake system that had begun to fail during his latest trip through the Rocky Mountains. Capital
9. Removed the old radio and replaced it with a new communications module. Capital
10. Replaced the old radar detector with a newer model that is fastened to the truck with a locking Capital

ekkarill92 answered 2 years ago
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