Chapter 10, Problem 24Q

To determine

Capitalizing the Cost: When the cost is incurred to enhance the value and the life of an asset, it needs to be capitalized in the books of accounts and shown in the balance sheet and is depreciated over the years.

Expensing the Cost: When the cost is incurred for the maintenance of an asset and does not add to the value of an asset, then it needs to be shown as an expense in the income statement.

To Explain: Implications on net income of current and future years when cost is treated as expense and when it is capitalized.