ACCA FA · Chapter 6 · Question 1 of 12
Which of the following items should be treated as capital expenditure?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Installation costs of a new production machine
Explanation
Capital expenditure is spent on acquiring non-current assets or enhancing their earning capacity, including costs necessary to bring an asset to working condition such as installation. Repainting, replacing tyres and routine servicing maintain existing assets and are revenue expenditure charged to profit or loss.
More Tangible and intangible non-current assets MCQs
- Q3A company with a 31 December year end bought equipment on 1 April 20X5 for $36,000. Its useful life is 8 years with a residual value of…
- Q4A vehicle costing $20,000 is depreciated at 25% per year on the reducing balance basis, with a full year's charge in the year of purchase…
- Q5A company with a 31 December year end bought a machine on 1 January 20X2 for $60,000. It is depreciated at 10% per year on cost, with a…
- Q6A business traded in an old van for a new van with a list price of $42,000. The dealer gave a part-exchange allowance of $9,500 and the…
- Q7A building with a cost of $400,000 and accumulated depreciation of $80,000 is revalued to $500,000. What amount should be credited to the…