Capitalization of asset expenditure: Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account. To indicate: The expenditure that is not recorded as cost of building.

Question

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Answer 1

Question

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

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Answer 2

Question

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

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Answer 3

Question

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

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Answer 4

Question

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

Answer 6

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.

Answer 7

Chapter 10, Problem 1QC

To determine

Capitalization of asset expenditure:

Whenever any capital asset is acquired for business the amount paid for the purchase, installation and initial repair or rework cost has to be capitalized i.e., debited to the capital asset or fixed asset account. This is general accepted accounting principle. This method is called as capitalization of an asset. Any further expense incurred such as minor repair, annual maintenance cost has to be charges to Profit & Loss Account.

To indicate:

The expenditure that is not recorded as cost of building.

Answer 8

Expert Solution & Answer

Answer to Problem 1QC

Solution:

Annual building maintenance should not be recorded as cost of a building.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Since this expenditure is incurred after the asset came into existence and not related to the asset and has to be incurred yearly, this has to be charges to Profit & Loss Account as expenses.

Conclusion:

Annual building maintenance should not be recorded as part of building.