In: Accounting
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. |
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 |