Categorize the following repairs on a truck as a Capital Expen...

Question

Categorize the following repairs on a truck as a Capital Expenditure or Ordinary Expense:

1. Major engine overhaul:

2. Oil change:

3. Replacement of windshield:

4. Modification of the body of the truck:

5. Addition to storage capacity of the truck:

6. Paint job:

Accepted Answer

Alright. Let's see how you guys did. Sometimes these can be a little tricky. The wording is everything here and I could see how there's a lot of gray areas sometimes. So let's go ahead and check these out. The first one, major engine overhaul. Notice, it said major. This is a big deal, right? A major engine and an overhaul is another big word here. Major engine overhaul. We're talking about changing the engine in the truck. Well, this is a capital expenditure. Okay? So this would increase the value of the truck as a as an asset expenditure. So, so yeah. Major engine overhaul. Capital expenditure. How about the next one? An oil change. Well, this is an ordinary repair, right? This is every every few months we got to do something like this. So that's an ordinary repair. How about the next one? Replacement of windshield. This one for a lot of students would be in the gray area. Is it a capital expenditure? Not really, right? This isn't a really big deal of what we're doing. We're just replacing the windshield. This isn't modifying the truck in some big way. We're not doing some big big change to it. You know, the windshield could get cracked overtime. And we're just gonna have to replace it to keep using the truck. This ends up being an ordinary repair. How about the next one? Modification of the body of the truck. That one sounds pretty good, right? We're modifying the truck. It sounds like a pretty big deal here. We're modifying it. This is gonna be a capital expenditure. This doesn't sound like an every everyday kind of thing that we might have to do there. Capital expenditure for this modification of the truck. How about the next one? Addition to storage capacity of the truck. This doesn't sound like an ordinary repair either, right? We're actually adding to the storage capacity. We're making it more useful for the company. So this is also a capital expenditure. Expenditure. And how about the last one? A paint job. Again, this one for students, this one can hit a gray area too. They might think this is a capital expenditure as well. Well, this is just an ordinary repair. That paint is going to chip away over time. We're not extending the life of the truck in any way. This is just maintaining the truck. Ordinary repair right there. Alright? So that's about it for this one. Let's go ahead and move on to the next practice.

Struggling with Financial Accounting?

Categorize the following repairs on a truck as a Capital Expenditure or Ordinary Expense:
1. Major engine overhaul:
2. Oil change:
3. Replacement of windshield:
4. Modification of the body of the truck:
5. Addition to storage capacity of the truck:
6. Paint job:

Watch next

Ordinary Repairs vs. Capital Improvements practice set

Struggling with Financial Accounting?

Categorize the following repairs on a truck as a Capital Expenditure or Ordinary Expense:1. Major engine overhaul:2. Oil change:3. Replacement of windshield:4. Modification of the body of the truck:5. Addition to storage capacity of the truck:6. Paint job:

Watch next

Ordinary Repairs vs. Capital Improvements practice set

Categorize the following repairs on a truck as a Capital Expenditure or Ordinary Expense:
1. Major engine overhaul:
2. Oil change:
3. Replacement of windshield:
4. Modification of the body of the truck:
5. Addition to storage capacity of the truck:
6. Paint job: