Chapter 10, Problem 13BE

To determine

Costs of acquisition and costs subsequent to acquisition: Any cost incurred to acquire the asset and to bring the asset to use is capitalized. For example, purchase price of the asset, installation charges of machinery, freight charges, razing of old building, draining the land in case of Land are capitalized. In other words any cost incurred before putting the asset to use is capitalized. However, subsequent to acquisition, any expense which would increase the useful life of the asset or enhance the quality and quantity of output, is also capitalized; for example, an overhaul of machinery. Any expenses incurred to maintain the asset is expensed.

To indicate: To indicate which cost should be expenses and the time of incur.