Which of the following costs related to the purchase of production equipment incurred by ABC Company during 2011 would be considered a revenue expenditure?
A) Installation costs for equipment
B) Purchase price of the equipment less the cash discount
C) Repair and maintenance costs during the equipment's first year of service
D) Transportation charges to deliver the equipment to ABC Company

Question

Quizplus · Accepted Answer

Repair and maintenance costs incurred during the equipment's first year of service are considered revenue expenditures because they are expenses necessary to keep the equipment running efficiently and do not increase the equipment's useful life. Installation costs, purchase price (less cash discount), and transportation charges are all capital expenditures because they are costs necessary to acquire the equipment and increase its useful life.

Which of the Following Costs Related to the Purchase of Production