Chapter 10, Problem 21E

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; e.g., 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, then such expenses are also capitalized, e.g. an overhaul of machinery. Any expenses incurred to maintain the asset is expensed.

To determine the treatment of expenses related to plant asset.