A. 3. D) It lists all the transactions related to capital stock. This Multiple Choice Questions (MCQs) quiz for Chapter Capital and revenue expenditures consists of 15 questions. B) It must be completed after the budgeted income statement is prepared. 2. The level of capital expenditure differs in different companies and industries. All other trademarks and copyrights are the property of their respective owners. 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. It is commonly used to expand the elevel of operations. Three types of expenditures are capital expenditure, revenue expenditure and deferred revenue expenditure. 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. answer choices . C. It must be completed before the cash budget is prepared. So, the correct answer is a. D. It must be completed after the budgeted income statement is prepared. B. True or False. Services, Capital Expenditures: Definition, Formula & Examples, Working Scholars® Bringing Tuition-Free College to the Community. d. Identifying capital addition projects and other capital needs. A) It is an outlay made to replace current assets. To decide whether a specified project is to be selected or not. Capital Expenditure and Revenue Expenditure DRAFT. It is commonly used to expand the level of operations 38) The basic motive for capital expenditure is to ________. 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. There’s no … 1st - University. Option (D) It is commonly used to expand the level of operations. It is true what they say: you need to spend money to make money, and capital expenditures are no exception. Business. All rights reserved. 2. To find out the profitable capital expenditure. In the meantime, and especially in the IT field, you run the risk of this item becoming outdated or outgrown before it has paid for itself. which of the following statements regarding capital expenditures is incorrect? c. Analyzing and evaluating all promising alternatives. Capital expenditure is incurred at one point of time whereas benefits of the expenditure are realized at different points of time in future. B. The company can fund capital expenditure through internal cash flows or through debt or equity financing. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. An Outlay For Advertising And Management Consulting Is Considered To Be A Fixed Asset Expenditure. A) It is part of a firm's investment plan. 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. It must be completed before the cash budget is prepared. Risk increases as the time between the R&D activity and the cash flows from the project increases. B) Once a capital investment is made, they are almost always impossible to reverse. Such assets include things like property, equipment, and infrastructure. 56% average accuracy. Mature industries have low level of capital expenditure while upcoming industries have high capital expenditure requirements. (Points : 4) The amount of time between the R&D activity and the cash flows from the project does not affect risk. B. Capital expenditure is the expenditure incurred to increase the productive opportunities of the company. Each question has 4 answers from which you need to choose the correct one. C. It is an outlay made to replace current assets. 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 A capital expenditure budget is a formal plan that states the amounts and timing of fixed asset purchases by an organization. Which of the following is a true of a capital expenditure? All rights reserved. B. Our experts can answer your tough homework and study questions. It is commonly used for current asset expansion. CMA 0696 3 … In accounting, how electric phone and other... For a monopolist, marginal revenue is: a. Revenue expenditure are those which are incurred during the day to day business activity for smooth running of the operation. C) It includes the sales budget. answer! Capital Leases . Which of the following statements is true of the capital expenditures budget? 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. asked Dec 22, 2018 in Business by kateranzweiler. It increases the investments of the company for generating more revenues or profits regarding the fixed assets of the company. (d) Capital expenditures are assets, and revenue expenditures are expenses. a. The following are the objectives of capital budgeting. C) Capital expenditures can be one-time investments or routine investments that allow the firm to continue its operations. A capital lease is a lease of business equipment that represents ownership and is reflected on the company's balance sheet as an asset. A. 27 times. © copyright 2003-2020 Study.com. 4. 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. C) Capital expenditures can be one-time investments or routine investments that allow the firm to continue its operations. The capital budget is a(n): A. What is the Capital Expenditure Budget? D. It is commonly used to expand the level of operations. (b) Capital expenditures and revenue expenditures are both expenses. 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. 43. 37) Which of the following is true of a capital expenditure? 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. It is classified as a fixed asset, which is then charged to expense over the useful life of the asset, using depreciation. It is commonly used for current asset expansion. D. It is an outlay expanded to produce benefits within one year. Making capital and expenditure decisions. Capital expenditure (CapEx) is a payment for goods or services recorded—or capitalized—on the balance sheet instead of expensed on the income statement. Greater risk is associated with improving existing products than creating new products. 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 Capital expenditures also require further investments to maintain and keep operational and will eventually have to be replaced, requiring yet another investment. Become a Study.com member to unlock this Capital expenditures are generally defined for tax purposes as the purchase of assets whose usefulness or value to a company exceeds one year. R&D activities is correct? All other trademarks and copyrights are the property of their respective owners. 7 months ago. Assess the non-financial performance of an organization b. Sciences, Culinary Arts and Personal 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? It includes the sales budget. B) It is an outlay expected to produce benefits within one year. b. Services, Capital Expenditures: Definition, Formula & Examples, Working Scholars® Bringing Tuition-Free College to the Community. It is an outlay expected to produce benefits within one year. The direct materials budget is prepared on the basis of the_______. Which of the following is true of a capital expenditures budget? Which of the following is true of a capital expenditure? (a) Capital expenditures and revenue expenditures are both assets. (c) Capital expenditures are expenses, and revenue expenditures are assets. C. It is an outlay made to replace current assets. 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. © copyright 2003-2020 Study.com. Which of the following statements is false? Capital expenditures, or … 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. Capital expenditures increase the net book value of the plant asset. 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. 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 … It is a part of the financial budget. 5. A capital expenditure is recorded as an asset, rather than charging it immediately to expense. Capital Expenditure The level of capital expenditure differs in different companies and industries. Become a member and unlock all Study Answers In planning and controlling capital expenditures, the most logical sequence is to begin with a. Analyzing capital addition proposals. Earn Transferable Credit & Get your Degree, Get access to this video and our entire Q&A library. B) Once a capital investment is made, they are almost always impossible to reverse. Get your Degree, Get access to this video and our entire Q & a library and deferred expenditure. This is also sometimes known as PP & E, short for property, plant, and capital expenditures of! 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