Question

Which of the following is not a capital expenditure? Multiple Choice Advertising expenditures to introduce a new product line Sales tax paid in conjunction with the purchase of new machinery Installation of elevators to replace escalators An amount paid to acquire a patent with a remaining life of only three years

Answer 1

Advertising expenditures to introduce a new product line is not a capital expenditure.

Explanation:

• Buying a new machinery and associated sales tax is a capital investment.
• Installation of elevators to replace escalators is a capital investment.
• Purchasing a patent is a capital investment.
• Advertising costs will in most cases fall under sales, general, and administrative (SG&A) expenses on a company's income statement.

So, Advertising expenditures to introduce a new product line is not a capital expenditure.