Capital expenditure is the expenditure incurred to increase the productive opportunities of the company. Which of the following is capital expenditure? Option (D) It is commonly used to expand the level of operations. Risk increases as the time between the R&D activity and the cash flows from the project increases. To know whether the replacement of any existing fixed assets gives more return than earlier. Having said that, they are nothing, if not necessary. For example, if you acquire a $25,000 asset and expect it to have a useful life of five years, then charge $5,000 to depreciation expense in each of the … Expenditure can be defined as the cost incurred by an organization for the purpose of acquiring the goods or services or for bringing improvements in the production opportunities. Which one of the following is NOT true about the capital budgeting process? What is the Capital Expenditure Budget? 52) Which of the following statements is true of the capital expenditures budget? In the meantime, and especially in the IT field, you run the risk of this item becoming outdated or outgrown before it has paid for itself. Capital expenditure are those which enhance the life of the asset and the benefits by incurring these expenditure arises in the coming years ahead. A capital lease, in contrast to an operating lease, is treated as a purchase from the standpoint of the person who is leasing and as a loan from the standpoint of the person who is offering the lease, for accounting purposes. asked Dec 22, 2018 in Business by kateranzweiler. It is an outlay expected to produce benefits within one year. Capital expenditure (CapEx) is a payment for goods or services recorded—or capitalized—on the balance sheet instead of expensed on the income statement. An Outlay For Advertising And Management Consulting Is Considered To Be A Fixed Asset Expenditure. Which one of the following is true about capital expenditures? 1. © copyright 2003-2020 Study.com. Such assets include things like property, equipment, and infrastructure. C) It records all short-term expenses for a period. 5. The direct materials budget is prepared on the basis of the_______. Classification of Capital Expenditure. Sciences, Culinary Arts and Personal It is classified as a fixed asset, which is then charged to expense over the useful life of the asset, using depreciation. Making capital and expenditure decisions. c. Analyzing and evaluating all promising alternatives. It increases the investments of the company for generating more revenues or profits regarding the fixed assets of the company. 1. A capital expenditure budget is a formal plan that states the amounts and timing of fixed asset purchases by an organization. D. It is an outlay expanded to produce benefits within one year. Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. Our experts can answer your tough homework and study questions. C) Capital expenditures can be one-time investments or routine investments that allow the firm to continue its operations. Each question has 4 answers from which you need to choose the correct one. Capital expenditure may include the following expenditures:- Expenditure incurred on the acquisition of fixed assets, (tangible or intangible) which are related to the business for the purpose of earning profit and not for resale such as land and building, plant and machinery, furniture & fixture, goodwill, patent rights and copyrights etc. In this way, it is responsible for increasing the net book value of an asset in order to use the asset for long period and generates more income from them. (c) Capital expenditures are expenses, and revenue expenditures are assets. C) It is commonly used for current asset expansion. A capital expenditure is recorded as an asset, rather than charging it immediately to expense. The capital expenditure may be classified into the following categories. Capital Expenditure and Revenue Expenditure DRAFT. A Capital Expenditure Is An Outlay Of Funds Invested Only In Fixed Assets That Is Expected To Produce Benefits Over A Period Of Time Less Than One Year. Which of the following is a true of a capital expenditure? Which of the following statements is true of the capital expenditures budget? Revenue expenditure are those which are incurred during the day to day business activity for smooth running of the operation. Capital Leases . (Points : 4) The amount of time between the R&D activity and the cash flows from the project does not affect risk. A capital expenditure is the use of funds by a company to acquire physical assets to improve its value or increase its long-term productivity. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. Planning and control of an organization's income and expenditure O c. Preparation of a five-year business plan O d. Company valuation The sum of Price Variance and Quantity Variance gives a.Income Variance b.Spending Variance c.Profit Variance d.Income Variance Select one: a. Assume Plastic Products, Inc., purchased... Michael is an Internet service provider. Capital expenditure is money used to buy, improve, or extend the life of fixed assets in an organization, and that have a useful life one year or more. Which of the following is true of a capital expenditures budget? 2. Which of the following statements is true of the capital expenditures budget? C. It is an outlay made to replace current assets. To decide whether a specified project is to be selected or not. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. Sciences, Culinary Arts and Personal Create your account. B. 3. d. Identifying capital addition projects and other capital needs. C) It includes the sales budget. This budget is part of the annual budget used by a firm, which is intended to organize activities for the upcoming year. 2. It is commonly used for current asset expansion. Which of the following is NOT true of capital expenditures? answer! 37) Which of the following is true of a capital expenditure? A. B) It is an outlay expected to produce benefits within one year. Which of the following statements is false? 27 times. The given statement is true.. Capital expenditure is the expenditure incurred to increase the productive opportunities of the company. Which of the following is true? D. It is commonly used to expand the level of operations. a. The level of capital expenditure differs in different companies and industries. Spending Rs.8.50 for purchase of spark plug is a normal cost of wear and tear, its not a capital nature expenses and to be recorded as … C. It must be completed before the cash budget is prepared. D) It lists all the transactions related to capital stock. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof. a.... Are the rising drug expenditures in the U.S.... Beech Corporation, an accrual basis taxpayer, was... Graffiti Advertising, Inc., reported the following... Quentin bought a new computer setup in 2016. All rights reserved. Mature industries have low level of capital expenditure while upcoming industries have high capital expenditure requirements. It will decrease the capital of the business. Assess the non-financial performance of an organization b. 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