Exeter Corporation purchased a piece of equipment with a price of $80,000 on March 1, 2018.The amounts below are related to the equipment purchase.Match the items below and explain why each revenue expenditure is not capitalized.
-During the installation, the equipment was damaged and repair costs of $2,000 were incurred.
A)This item should be included as part of the cost of the equipment.
B)This item should be considered a revenue expenditure.

Question

Quizplus · Accepted Answer

The repair costs incurred during installation are considered a revenue expenditure because they were not necessary to bring the equipment to its intended use. Capitalizing these costs would overstate the value of the equipment and its useful life.

Exeter Corporation Purchased a Piece of Equipment with a Price