Section A

SolarTech Manufacturing recently upgraded its primary assembly line. Which TWO of the following expenditures should be classified as capital expenditure?

Answer options:

Routine maintenance of the old conveyor belts prior to disposal

Installation costs of the new robotic arms

Cost of upgrading the factory's electrical grid to handle the new machinery

Training costs for staff to operate the new robotic arms

How to approach this question

Determine which costs are directly attributable to bringing the asset into working condition (capital) versus ongoing or non-controlled costs (revenue).

Full Answer

Capital expenditure includes the initial purchase price and any directly attributable costs to bring the asset to its working condition (e.g., installation, site preparation). Routine maintenance and staff training are revenue expenditures.

Common mistakes

Many students incorrectly capitalize staff training costs, forgetting that a company cannot 'control' its employees in an accounting sense.

Question 02 All questions Question 04

Practice the full ACCA FA — Financial Accounting Practice Exam 1

65 questions · hints · full answers · grading

More questions from this exam

Q01**Section A** BioGenix Ltd, a pharmaceutical startup, has spent $2 million on researching a new ...Medium Q02**Section A** Which of the following bodies is primarily responsible for issuing International F...Easy Q04**Section A** AgriGrow Ltd sells specialized farming equipment. A customer purchases a tractor f...Medium Q05**Section A** Oceanic Logistics provides shipping services. They issue an invoice for $10,000 to...Medium Q06**Section A** Quantum Computing Ltd has 500 units of a specific microchip in inventory. The orig...Medium

View all 65 questions →