{"id":202713,"date":"2025-03-18T04:09:37","date_gmt":"2025-03-18T04:09:37","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=202713"},"modified":"2025-03-18T04:09:39","modified_gmt":"2025-03-18T04:09:39","slug":"capital-budgeting-is-used-to-evaluate-the-purchase-of","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/18\/capital-budgeting-is-used-to-evaluate-the-purchase-of\/","title":{"rendered":"Capital budgeting is used to evaluate the purchase of"},"content":{"rendered":"\n

Capital budgeting is used to evaluate the purchase of:<\/p>\n\n\n\n

a machine
inventory
a computer
office supplies<\/p>\n\n\n\n

The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n

Correct Answer:<\/strong> A machine and a computer.<\/p>\n\n\n\n

Explanation:<\/strong>
Capital budgeting is a financial process used by businesses to evaluate potential long-term investments and expenditures. It involves analyzing major capital expenditures that require significant financial outlays and have long-term implications for the company.<\/p>\n\n\n\n

Among the given options, a machine<\/strong> and a computer<\/strong> qualify as capital expenditures because they are long-term assets that contribute to the company’s productivity and efficiency. These assets typically have a useful life of several years and require careful evaluation before purchase.<\/p>\n\n\n\n

Why a Machine and a Computer?<\/h3>\n\n\n\n
    \n
  1. Machine:<\/strong><\/li>\n<\/ol>\n\n\n\n
      \n
    • A machine is a capital asset because it is used in production or operations for an extended period.<\/li>\n\n\n\n
    • Companies use capital budgeting techniques like Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period to assess whether purchasing the machine will generate positive returns over time.<\/li>\n\n\n\n
    • The cost of the machine is recorded as a capital expenditure, meaning it is depreciated over its useful life rather than being expensed immediately.<\/li>\n<\/ul>\n\n\n\n
        \n
      1. Computer:<\/strong><\/li>\n<\/ol>\n\n\n\n
          \n
        • A computer, especially for business use, is considered a capital asset if it is expected to be used for multiple years.<\/li>\n\n\n\n
        • Like a machine, its purchase is evaluated through capital budgeting techniques to determine if the investment will be financially beneficial.<\/li>\n\n\n\n
        • The cost of high-end computers used in businesses is often capitalized and depreciated over time.<\/li>\n<\/ul>\n\n\n\n

          Why Not Inventory and Office Supplies?<\/h3>\n\n\n\n
            \n
          • Inventory:<\/strong> Inventory is a current asset used in day-to-day operations. It is not considered a capital expenditure because it is expected to be sold or used within a short period. Inventory purchases are accounted for as operating expenses.<\/li>\n\n\n\n
          • Office Supplies:<\/strong> Items like paper, pens, and printer ink are considered short-term operational expenses and are not capitalized. They are categorized under office expenses and are not evaluated through capital budgeting.<\/li>\n<\/ul>\n\n\n\n

            Thus, capital budgeting is primarily used to evaluate the purchase of a machine<\/strong> and a computer<\/strong> as they are long-term investments.<\/p>\n","protected":false},"excerpt":{"rendered":"

            Capital budgeting is used to evaluate the purchase of: a machineinventorya computeroffice supplies The correct answer and explanation is : Correct Answer: A machine and a computer. Explanation:Capital budgeting is a financial process used by businesses to evaluate potential long-term investments and expenditures. It involves analyzing major capital expenditures that require significant financial outlays and […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-202713","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/202713","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=202713"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/202713\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=202713"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=202713"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=202713"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}