Answer the following statements true (T) or false (F)
1. An expenditure that increases the capacity or efficiency of a plant asset or that extends the asset's life is known as a revenue expenditure.
2. Repair work that generates a capital expenditure because it extends a plant asset's useful life past the normal expected life is known as an extraordinary repair.
3. Ordinary repairs to plant assets are referred to as revenue expenditures.
4. If a minor repair was incorrectly debited to the asset account, expenses and net income would be
5. If a company expenses an extraordinary repair, net income would be understated and the asset would be understated.
1. FALSE - An expenditure that increases the capacity or efficiency of a plant asset or that extends the asset's life is known as a capital expenditure.
2. TRUE
3. TRUE
4. FALSE / Explanation: If a minor repair was incorrectly debited to the asset account, expenses and net income would be understated and net income would be overstated.
5. TRUE
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