From page 7-3 of the VLN, expenditures after acquisition are either expensed or capitalized. The company spent money on improving their equipment and needs to capitalize the cost. To capitalize this cost means toGroup of answer choicesA. add the cost to maintenance expense and put it on the income statement.B. add the cost to the equipment account and put it on the balance sheet.C. add the cost to maintenance expense and put it on the balance sheet.D. add the cost to the equipment account and put it on the income statement. EXPENDITURES AFTER ACQUISTIONEXPENDITURES to EXPENSERepairs and Maintenance:-benefits current accounting period only;-expenditures that simply maintain a given level of service fromthe asset;-amounts are normally small(er);-normal maintenance;-expense these costs as they are incurred.EXPENDITURES to CAPITALIZE-the cost is treated as an asset (added to the original acquisitioncost of the asset)-costs incurred to achieve greater future benefits-increases asset's life, makes the asset more efficient, orincreases asset's capacityImprovements/Major RepairsAdditionsLegal Defense of Intangible Assets-if successful, add to the legal costs of the intangible asset-if unsuccessful, expense the legal costsMateriality-if amount is small it will be expensed (i.e., a stapler)PracticeKL Manufacturing Company incurs the following expendituresduring the year:Remodel the manufacturing plant to improve production $45,000Replaced oil and filters on all company trucks for the year $1,800Security system installed in warehouse$22,000Determine the amount that should be recorded as an expense this year: $Determine the amount that should be capitalized as an asset: $If all of the costs are expensed in the year of expenditure, howwould that affect:Expenses in the year of expenditureNet income in the year of expenditureAssets in the year of expenditureExpenses (depreciation expense) in future yearsNet income in future yearsAssets in future years

Expenditure made after acquisition of an asset can be treated as capital expenditure or revenue…

Answered: the VLN, expenditures after acquisition…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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From page 7-3 of the VLN, expenditures after acquisition are either expensed or capitalized. The company spent money on improving their equipment and needs to capitalize the cost. To capitalize this cost means to Group of answer choices A. add the cost to maintenance expense and put it on the income statement. B. add the cost to the equipment account and put it on the balance sheet. C. add the cost to maintenance expense and put it on the balance sheet. D. add the cost to the equipment account and put it on the income statement.

EXPENDITURES AFTER ACQUISTION
EXPENDITURES to EXPENSE
Repairs and Maintenance:
-benefits current accounting period only;
-expenditures that simply maintain a given level of service from
the asset;
-amounts are normally small(er);
-normal maintenance;
-expense these costs as they are incurred.
EXPENDITURES to CAPITALIZE
-the cost is treated as an asset (added to the original acquisition
cost of the asset)
-costs incurred to achieve greater future benefits
-increases asset's life, makes the asset more efficient, or
increases asset's capacity
Improvements/Major Repairs
Additions
Legal Defense of Intangible Assets
-if successful, add to the legal costs of the intangible asset
-if unsuccessful, expense the legal costs
Materiality
-if amount is small it will be expensed (i.e., a stapler)
Practice
KL Manufacturing Company incurs the following expenditures
during the year:
Remodel the manufacturing plant to improve production $45,000
Replaced oil and filters on all company trucks for the year $1,800
Security system installed in warehouse
$22,000
Determine the amount that should be recorded as an expense this year: $
Determine the amount that should be capitalized as an asset: $
If all of the costs are expensed in the year of expenditure, how
would that affect:
Expenses in the year of expenditure
Net income in the year of expenditure
Assets in the year of expenditure
Expenses (depreciation expense) in future years
Net income in future years
Assets in future years

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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