52) Which of the following statements is true of the capital expenditures budget? (b) Capital expenditures and revenue expenditures are both expenses. Capital expenditures, or … (d) Capital expenditures are assets, and revenue expenditures are expenses. C. It is an outlay made to replace current assets. Capital expenditures are generally defined for tax purposes as the purchase of assets whose usefulness or value to a company exceeds one year. (c) Capital expenditures are expenses, and revenue expenditures are assets. Capital expenditure, as opposed to revenue expenditure, is generally of a one-off kind and its benefit is derived over several accounting periods. It increases the investments of the company for generating more revenues or profits regarding the fixed assets of the company. D. It is commonly used to expand the level of operations. Revenue expenditure are those which are incurred during the day to day business activity for smooth running of the operation. The capital budget is a(n): A. B. All rights reserved. C. It is an outlay made to replace current assets. 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. To find out the profitable capital expenditure. Each question has 4 answers from which you need to choose the correct one. 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. Capital expenditure is otherwise called as Capital Investments. 5. B) It is an outlay expected to produce benefits within one year. Which of the following is a true of a capital expenditure? It will decrease the capital of the business. Which of the following statements is false? 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. 56% average accuracy. C) Capital expenditures can be one-time investments or routine investments that allow the firm to continue its operations. Assessing risk is a trivial part of research and development. B. There’s no … (a) Capital expenditures and revenue expenditures are both assets. 2. To find out the quantum of finance required for the capital expenditure. Accounting for a Capital Expenditure. D) It lists all the transactions related to capital stock. The capital expenditure may be classified into the following categories. which of the following statements regarding capital expenditures is incorrect? 1) Which of the following is a capital expenditure? C) Capital expenditures can be one-time investments or routine investments that allow the firm to continue its operations. It is a part of the financial budget. Assume Plastic Products, Inc., purchased... Michael is an Internet service provider. Capital Expenditure The level of capital expenditure differs in different companies and industries. Having said that, they are nothing, if not necessary. Risk increases as the time between the R&D activity and the cash flows from the project increases. 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. D) All of the above are true of capital investments. A capital lease is a lease of business equipment that represents ownership and is reflected on the company's balance sheet as an asset. The direct materials budget is prepared on the basis of the_______. D. It must be completed after the budgeted income statement is prepared. Mature industries have low level of capital expenditure while upcoming industries have high capital expenditure requirements. It must be completed before the cash budget is prepared. What is the Capital Expenditure Budget? Capital expenditures usually take two forms: maintenance expenditures and expansion expenditures.Due to their substantial initial costs, irreversibility, and long-term effects, capital expenditure decisions are very critical to an organization. Become a member and unlock all Study Answers B) It must be completed after the budgeted income statement is prepared. 7 months ago. Services, Capital Expenditures: Definition, Formula & Examples, Working Scholars® Bringing Tuition-Free College to the Community. The given statement is true.. Capital expenditure is the expenditure incurred to increase the productive opportunities of the company. It is commonly used for current asset expansion. The result of recording a capital expenditure as... On 12-31-15, Acme purchased a machine. B) Once a capital investment is made, they are almost always impossible to reverse. Capital expenditures also require further investments to maintain and keep operational and will eventually have to be replaced, requiring yet another investment. A) It is a part of the financial budget. In planning and controlling capital expenditures, the most logical sequence is to begin with a. Analyzing capital addition proposals. The company can fund capital expenditure through internal cash flows or through debt or equity financing. The level of capital expenditure differs in different companies and industries. 43. The following are the objectives of capital budgeting. c. Analyzing and evaluating all promising alternatives. Capital expenditures (CapEx) refers to the money a company spends towards fixed assets, such as the purchase, maintenance, and improvement of buildings, vehicles, equipment, or land. Making capital and expenditure decisions. Which of the following is true of a capital expenditure? 3. To know whether the replacement of any existing fixed assets gives more return than earlier. All rights reserved. So, the correct answer is a. The purchase of a new house is included in A.... Matrix Organizational Structure: Advantages, Disadvantages & Examples, DSST Money & Banking: Study Guide & Test Prep, International Retailing Strategy & Operations, Intro to Excel: Essential Training & Tutorials, Financial Accounting: Homework Help Resource, UExcel Business Law: Study Guide & Test Prep, DSST Human Resource Management: Study Guide & Test Prep, Introduction to Human Resource Management: Certificate Program, Human Resource Management: Help and Review, College Macroeconomics: Homework Help Resource, Introduction to Macroeconomics: Help and Review, UExcel Business Ethics: Study Guide & Test Prep, Principles of Business Ethics: Certificate Program, DSST Computing and Information Technology: Study Guide & Test Prep, Introduction to Computing: Certificate Program, Introduction to Business: Homework Help Resource, Biological and Biomedical It includes the sales budget. Our experts can answer your tough homework and study questions. Which of the following statements is true of the capital expenditures budget? D. It is an outlay expanded to produce benefits within one year. Which one of the following is true about capital expenditures? Business. A. 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. a) Payment of an account payable b) Retirement of bonds payable c) Payment of federal income taxes d) none of these 2) which of the following is not a capital expenditure? All other trademarks and copyrights are the property of their respective owners. Services, Capital Expenditures: Definition, Formula & Examples, Working Scholars® Bringing Tuition-Free College to the Community. answer! It is commonly used for current asset expansion. asked Dec 22, 2018 in Business by kateranzweiler. Our experts can answer your tough homework and study questions. This Capital and revenue expenditures MCQs test will help you to prepare for your objective type exams, interviews and to clear your concepts. All other trademarks and copyrights are the property of their respective owners. The capital budget is a(n): A. 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. Capital expenditure is the expenditure incurred to increase the productive opportunities of the company. Greater risk is associated with improving existing products than creating new products. 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. 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. Capital expenditures represent some of the largest expenses associated with an investment property. answer choices . Capital expenditures increase the net book value of the plant asset. To decide whether a specified project is to be selected or not. B) It indicates all the estimated cash receipts and cash payments for a period of time. B) Once a capital investment is made, they are almost always impossible to reverse. 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. It is true what they say: you need to spend money to make money, and capital expenditures are no exception. True or False. B. Which of the following is NOT true of capital expenditures? A. D) It must be completed before the cash budget is prepared. Capital expenditure are those which enhance the life of the asset and the benefits by incurring these expenditure arises in the coming years ahead. 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. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. True or False. b. Option (D) It is commonly used to expand the level of operations. An Outlay For Advertising And Management Consulting Is Considered To Be A Fixed Asset Expenditure. B. Become a Study.com member to unlock this © copyright 2003-2020 Study.com. Three types of expenditures are capital expenditure, revenue expenditure and deferred revenue expenditure. Which of the following is capital expenditure? Capital Leases . Sciences, Culinary Arts and Personal A capital expenditure is recorded as an asset, rather than charging it immediately to expense. A) It summarizes plans for acquiring fixed assets. A capital expenditure budget is a formal plan that states the amounts and timing of fixed asset purchases by an organization. a. A) It is an outlay made to replace current assets. 1st - University. C) It records all short-term expenses for a period. 1. However, the capital expenditure are not recorded in the operating section so option (ii) is incorrect. Capital expenditure (CapEx) is a payment for goods or services recorded—or capitalized—on the balance sheet instead of expensed on the income statement. This budget is part of the annual budget used by a firm, which is intended to organize activities for the upcoming year. Suppose a firm's tax rate is 35%. R&D activities is correct? Which of the following is true of a capital expenditures budget? In accounting, how electric phone and other... For a monopolist, marginal revenue is: a. © copyright 2003-2020 Study.com. Sciences, Culinary Arts and Personal 4. 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 … Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. A. Capital Expenditure and Revenue Expenditure DRAFT. 37) Which of the following is true of a capital expenditure? Create your account. Which of the following is true? CMA 0696 3 … C. It must be completed before the cash budget is prepared. 1. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. Such assets include things like property, equipment, and infrastructure. 2. C) It includes the sales budget. In... Matrix Organizational Structure: Advantages, Disadvantages & Examples, DSST Money & Banking: Study Guide & Test Prep, International Retailing Strategy & Operations, Intro to Excel: Essential Training & Tutorials, Financial Accounting: Homework Help Resource, UExcel Business Law: Study Guide & Test Prep, DSST Human Resource Management: Study Guide & Test Prep, Introduction to Human Resource Management: Certificate Program, Human Resource Management: Help and Review, College Macroeconomics: Homework Help Resource, Introduction to Macroeconomics: Help and Review, UExcel Business Ethics: Study Guide & Test Prep, Principles of Business Ethics: Certificate Program, DSST Computing and Information Technology: Study Guide & Test Prep, Introduction to Computing: Certificate Program, Introduction to Business: Homework Help Resource, Biological and Biomedical Which one of the following is NOT true about the capital budgeting process? (Points : 4) The amount of time between the R&D activity and the cash flows from the project does not affect risk. A) It is part of a firm's investment plan. C) It is commonly used for current asset expansion. Which of the following is true of a capital expenditure? This is also sometimes known as PP&E, short for property, plant, and equipment. It is commonly used to expand the elevel of operations. Capital Expenditure may include the following: Purchase costs (less any discount received) It is classified as a fixed asset, which is then charged to expense over the useful life of the asset, using depreciation. Classification of Capital Expenditure. It is commonly used to expand the level of operations 38) The basic motive for capital expenditure is to ________. 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. 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 … d. Identifying capital addition projects and other capital needs. Which of the following statements is true of the capital expenditures budget? 27 times. Assess the non-financial performance of an organization b. 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. Capital expenditure is incurred at one point of time whereas benefits of the expenditure are realized at different points of time in future. It is an outlay expected to produce benefits within one year. By an organization, they are nothing, if not necessary income statement is prepared on the income is... Investments or routine investments that allow the firm to continue its operations is recorded an... Will help you to prepare for your objective type exams, interviews and to clear your.. Interviews and to clear your concepts, 2018 in business by kateranzweiler type exams, interviews and to clear concepts... Upcoming industries have low level of capital expenditure are not recorded in the operating section so (. Result of recording a capital lease is a lease of business equipment that ownership... Consulting is Considered to be a fixed asset expenditure lists all the transactions related to capital stock true capital! Within one year tough homework and study questions assets, and equipment products creating. Almost always impossible to reverse ) quiz for Chapter capital and revenue expenditures are assets, and.! An outlay expanded to produce benefits within one year in accounting, electric! Rather than charging It immediately to expense and capital expenditures budget at different of. 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