If Halley Industries reimburses employees who earn master\'s degrees and who agr
ID: 2718900 • Letter: I
Question
If Halley Industries reimburses employees who earn master's degrees and who agree to remain with the firm for an additional 4 years, should the expense of the tuition reimbursement be categorized as a capital expenditure or an operating expenditure?
a. The tuition reimbursement should be categorized as a operating expenditure since the outlay of funds is expected to produce benefits over a period of time greater than 1 year
b. The tuition reimbursement should be categorized as a capital expenditure since the outlay of funds is expected to produce benefits over a period of time greater than 1 year
c.The tuition reimbursement should be categorized as a capital expenditure since the outlay of funds represents an expense incurred in transacting normal business operations
d. The tuition reimbursement should be categorized as a operating expenditure since the outlay of funds represents an expense incurred in transacting normal business operations
Explanation / Answer
the expense of the tution reimbursement is a capital expenditure as it is not incured on daily or monthly basis.
in the above scenario is it occred and is giving the benefit for the 4 years.
hence, it is a capital expenditure since the outlay of funds is expected to produce the benefit in time greater than 1 year, that is 4 years.
it menas that the benefits of the outlay will start arriving after 1 year or more.
hence, the correct option is B.