EJ0.23 (LO 4) (AnglYsis 6f subseauent EXpenditures) Plant assets often require expenditures sybseguent to ganisition. It is important that they Shoyld be capitalized (O or exensed (E in the Period insyrred. q Improvement. Replacement 0f a minor broken Partu on 9 maChine. Expenditure that increases the useful life of an existing 9sset. Expenliture that increases the efficienCy and effectiveness Of a Productive asset but does not increase it's salvage value
EJ0.23 (LO 4) (AnglYsis 6f subseauent EXpenditures) Plant assets often require expenditures sybseguent to ganisition. It is important that they Shoyld be capitalized (O or exensed (E in the Period insyrred. q Improvement. Replacement 0f a minor broken Partu on 9 maChine. Expenditure that increases the useful life of an existing 9sset. Expenliture that increases the efficienCy and effectiveness Of a Productive asset but does not increase it's salvage value
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Expenditure that Increases the efficiency
and effectiveness of a Productive
9sset and increases the asset's
Salvage valuei
EXpenditure that increases the vuality of the
04teut of the productive asseto
t.
Improvement to aa machine that increased
it's fair market Value and it's production
(apacity by 30%o without extending
the machine's useful llfe.
9.
h.
Ordingry Pepairsa
Transcribed Image Text:EJ0.23 (LO4) (Angl Ysis of Sybseayent Expenditures)
Plant assets often reguire expenitures sybseguent to acouisition.
It is important that they Shoyld be capitalized
(O or exeensed (E) in the Period incyrred.
q Improvemente
Replacement 0f a minor broken partu on 9 ma Chine.
Expenditure that increases the use ful life of an
existing 9sset.
Expenliture that increases the efficienCy and effectiveness
Of a productive asset but does not increase
it's salvage value,
Expert Solution
Introduction :
After purchasing the asset, there comes a need to incur the further expenditure in subsequent period. In this case a question arises that whether the subsequent expenditure can be capitalized or not. There is a principle related to deciding the nature of the expenditure and on the basis of it the decision will be taken.
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