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

9. Current Liabilities

Types of Liabilities

Financial Accounting

9. Current Liabilities

Types of Liabilities

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Multiple Choice

Which of the following types of subsequent expenditures is NOT normally capitalized as a liability?

Major improvements extending asset life

Replacements that enhance asset value

Additions that increase asset capacity

Ordinary repairs and maintenance

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Verified step by step guidance

Understand the concept of capitalization: Capitalization refers to recording an expenditure as an asset rather than an expense. This is typically done when the expenditure provides future economic benefits, such as extending the life, enhancing the value, or increasing the capacity of an asset.

Review the types of subsequent expenditures: Major improvements, replacements, and additions are typically capitalized because they either extend the useful life of the asset, enhance its value, or increase its capacity to generate revenue.

Analyze ordinary repairs and maintenance: These expenditures are recurring and necessary to keep the asset in its normal operating condition. They do not provide future economic benefits beyond maintaining the asset's current functionality, so they are expensed rather than capitalized.

Compare ordinary repairs and maintenance with capitalized expenditures: Ordinary repairs and maintenance differ from major improvements, replacements, and additions because they do not significantly alter the asset's life, value, or capacity.

Conclude that ordinary repairs and maintenance are NOT capitalized: Since ordinary repairs and maintenance do not meet the criteria for capitalization, they are recorded as expenses in the period they occur.