A Level Accounting (9706)•9706/12/M/J/25
Explanation
Net adjustment for misclassified capital and revenue expenditures Steps:
- Identify $450 repairs in machinery purchases as revenue expenditure; deduct from non-current assets cost.
- Identify $250 wiring and heating in expenses as capital expenditure; add to non-current assets.
- Identify $45 delivery in carriage inwards as capital expenditure; add to non-current assets.
- Compute net change: -250 + 155 decrease. Why A is correct:
- Capital expenditures increase asset values while revenue ones decrease them when reclassified, yielding net $155 reduction per accounting principles for fixed asset costing. Why the others are wrong:
- B. 250 from 45 addition.
- C. 45 from 250 addition.
- D. 250 + $45 additions. Final answer: A
Topic: Accounting for non-current assets
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