1. A restaurant purchased its original supply of china, glassware and silver on January 1, 2020 at a cost of $630,000 on credit. The useful life is estimated at five years and the salvage value is estimated at $330,000. The straight-line depreciation has been selected to depreciate the acquisition cost. On February 1, 2020 there was a cash purchase of replacement china, glassware and silver totalling $150,000. The restaurants policy regarding the depreciation of china, glassware and silver is to capitalize the acquisition cost, depreciate on the basis of this cost, and charge the cost of any replacements to an expense account.

Journalize:

1. the entries to record the acquisition (2 marks)
2. the depreciation as at January 31, 2020 (2 marks)
3. the purchase of the replacement (Show Calculations) (5 Marks).

2. On June 1, 2020, a restaurant purchased a stove that had a list price of $4,000,000 and agreed to pay the following charges: freight charge - $100,000, special wiring - $70,000 and installation - $45,000. After the installation, the stove handle broke and had to be replaced for $20,000 at the Restaurants expense. All transactions were by cash.

Required

1. What should the acquisition cost for the Stove be?
2. Prepare a journal entry to record the transaction
3. Did you treat the repairs as a capital expenditure or as a revenue expenditure?
4. What is the difference between Capital and Revenue Expenditure