AIBE III 2012 Question 90 Answer

AIBE III 2012 Question 90

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Question 90 of 100 AIBE III 2012 Set Common

Company A is expanding its business and leases a piece of land for three years, and agrees to return the land without any modifications to the lessor. Since the land is ideal for agriculture, it constructs a large storage shed on the land. Which of the following Statements most accurately applies the principle below?

A The expenditure on building the storage shed is a capital expenditure, since the storage shed provides Company A with an enduring benefit.
B The expenditure on leasing the land is a capital expenditure, since the land provides Company A with an enduring benefit.
C The expenditure on leasing the land as well as building the storage shed is a capital expenditure, as it provides Company A with an enduring benefit.
D The expenditure on building the storage shed is not a capital expenditure, as it only provides a business advantage and not an enduring benefit. Official answer
E The expenditure on building the storage shed is a capital expenditure, since it provides Company A with an enduring benefit, but the expenditure on leasing the land is not a capital expenditure, as it only provides a business advantage.