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

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Financial Accounting

3. Accrual Accounting Concepts

Introduction to Adjusting Journal Entries and Prepaid Expenses

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Which of the following subsequent expenditures related to a long-term asset would NOT be capitalized?

Major improvements that extend the asset's useful life

Routine maintenance and repairs

Upgrades that enhance the asset's value

Additions that increase the asset's capacity

Previous problemNext problem

Verified step by step guidance

Understand the concept of capitalization: Capitalization involves recording an expenditure as an asset on the balance sheet rather than as an expense on the income statement. This is typically done for costs that provide future economic benefits.

Identify the types of expenditures that are capitalized: Expenditures such as major improvements, upgrades, and additions are capitalized because they either extend the useful life of the asset, enhance its value, or increase its capacity.

Recognize the nature of routine maintenance and repairs: Routine maintenance and repairs are recurring costs that do not provide future economic benefits beyond the current period. These costs are expensed immediately on the income statement.

Compare the options provided: Major improvements, upgrades, and additions all meet the criteria for capitalization, as they provide long-term benefits. Routine maintenance and repairs, however, do not meet these criteria and are not capitalized.

Conclude that routine maintenance and repairs are the expenditures that would NOT be capitalized, as they are treated as expenses rather than assets.