PART A

$(6$ marks; $7$ minutes$)$

The following three scenarios of capital expenditure are given to you:

a$)$ Transco Ltd is a logistics company with operations in countries in the Southern African

Development Community $($SADC$)$ region. While delivering to one of the countries, a truck was

filled with contaminated diesel. The truck could not drive further, and the mechanic's report, stated

that the diesel damaged the truck's engine beyond repair. As the cost to replace the truck's engine

was much higher than the book value of the truck, the company decided to buy a brand$-$new truck.

b$)$ Gate$-$Motors Ltd is a manufacturer of electric$-$ and boom gate motors and it has few machines

used in its assembly process. One of the machines broke down and after contacting the supplier,

it was found that the machine could be reconditioned by replacing the old engine and gearbox.

c$)$ OPPO Plc manufactures and distributes mobile cellphones and related mobile accessories. The

increased use of face recognition technology in the mobile cellphone market led to the acquisition

of a small company called "Face$-$Tech" with state$-$of$-$the$-$art technology in face recognition

technology. This was after a strategic review revealed that they have no in$-$house expertise within

this space. The acquisition will enable OPPO to compete better in the mobile markets.

REQUIRED:

Identify the correct type of capital expenditure for each of the listed scenarios, and briefly explain why

it should be classified as that specific type of capital expenditure type.