Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

8. Long Lived Assets

Ordinary Repairs vs. Capital Improvements

Financial Accounting

8. Long Lived Assets

Ordinary Repairs vs. Capital Improvements

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Multiple Choice

Which of the following best describes extraordinary repairs in the context of accounting for property, plant, and equipment?

Expenditures that significantly extend the useful life or increase the value of an asset and are capitalized.

Routine maintenance costs that keep an asset in normal operating condition and are expensed as incurred.

Costs incurred to insure an asset against loss or damage.

Minor repairs that do not increase the asset's value or useful life and are recorded as revenue.

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Verified step by step guidance

Understand the concept of extraordinary repairs: These are expenditures made to significantly extend the useful life of an asset or increase its value. They are not routine maintenance but rather substantial improvements.

Differentiate between capitalized costs and expensed costs: Extraordinary repairs are capitalized, meaning they are added to the asset's book value and depreciated over time. Routine maintenance, on the other hand, is expensed immediately in the period incurred.

Analyze the options provided: Identify which option aligns with the definition of extraordinary repairs. Look for keywords like 'extend useful life,' 'increase value,' and 'capitalized.'

Eliminate incorrect options: For example, routine maintenance costs are expensed, not capitalized. Similarly, costs for insurance or minor repairs do not meet the criteria for extraordinary repairs.

Select the correct answer: The option that describes expenditures that significantly extend the useful life or increase the value of an asset and are capitalized is the correct choice.