Question

The quality of fixed assets is said to have increased when expenditure results in :
1. Increase in probable useful life of the fixed asset
2. Increase in the capacity of the fixed asset
3. Increase in the efficiency of the fixed asset
4. Operating economy
5. Increase in the quantity of output beyond that originally anticipated.

• A. $1,2$ and $3$
• B. $2,3$ and $4$
• C. $1,2,3$ and $4$
• D. $1,2,3,4$ and $5$

Answer 1

The correct option is D $1,2,3,4$ and $5$

If the quality of a fixed asset increases it means that the economic benefits to be derived from that asset also increases.Any expenditure on fixed asset which leads to an increase in its useful life, capacity, efficiency, operating economy or output mean that the quality of asset has improved as compared to its past performance, which is a good sign.

Note: Such expenditures are usually capitalized.