Overhaul expenses of a second-hand machinery purchased are revenue exp...
False, Overhaul expenses of a second-hand machinery purchased are capital expenditure.
Explanation:
Capital expenditure is an expenditure that is incurred for the purpose of acquiring or improving a capital asset, such as machinery or equipment, with a view to earning revenue over a number of years. On the other hand, revenue expenditure is the expenditure that is incurred in the course of the day-to-day running of the business and is fully deductible in the year in which it is incurred.
When a second-hand machinery is purchased, it is a capital asset for the company. Any expense incurred on the machinery to make it operational or to improve its performance, such as overhaul expenses, are capital expenditures. These expenses are capitalized and added to the cost of the machinery, which is then depreciated over its useful life.
For example, if a company purchases a second-hand machinery for $50,000 and spends $10,000 on its overhaul, the total cost of the machinery would be $60,000. This cost would be capitalized and the company would depreciate the machinery over its useful life, which would be determined based on the estimated useful life of the machinery.
In conclusion, overhaul expenses of a second-hand machinery purchased are capital expenditure as they are incurred to improve the performance of a capital asset and are capitalized and depreciated over its useful life.
Overhaul expenses of a second-hand machinery purchased are revenue exp...
It is capital expenditure. If we incur overhaul expense it increases the life time of the asset . so it is useful for many years .
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