Principles of Accounting
12th Edition
ISBN: 9781133626985
Author: Belverd E. Needles, Marian Powers, Susan V. Crosson
Publisher: Cengage Learning
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Concept explainers
Textbook Question
Chapter 2, Problem 1DQ
A company incurs a cost for a part that is needed to repair a piece of equipment. Is the cost an asset or an expense? Explain.
Expert Solution & Answer
To determine
Explain whether the repair cost is an asset or an expense.
Explanation of Solution
Explain whether the repair cost is an asset or an expense.
In general, all equipment requires normal repair. So, this costs are considered as on-going cost of business and classified as expenses. Though, it is argued as repair is the major part for the equipment’s and such major repair is done for every five years and this expense will benefit for upcoming years. Therefore, it could be recorded as an asset.
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Students have asked these similar questions
Why do we include all the incidental charges relating to the acquisition of a machine in its cost?
Which of the following is/are not true about Committed costs
a.
They are costs incurred to maintain a company's facilities.
b.
They are costs over which the management has little or no discretion.
c.
Depreciation, Insurance, Taxes etc are examples of committed costs.
d.
They are also known as Programmed costs.
Identify which of the following is classified as a revenue expenditure
a.
Installation expense paid for fixing the machine
b.
Cost of purchase of Machine
c.
Expense incurred for repairing the machine
d.
Import duty paid for importing the machin
Chapter 2 Solutions
Principles of Accounting
Ch. 2 - A company incurs a cost for a part that is needed...Ch. 2 - Prob. 2DQCh. 2 - Prob. 3DQCh. 2 - Prob. 4DQCh. 2 - How are assets and expenses related, and why are...Ch. 2 - Prob. 6DQCh. 2 - Prob. 7DQCh. 2 - Prob. 8DQCh. 2 - Tell whether each of the following accounts is an...Ch. 2 - Prob. 2SE
Ch. 2 - Prob. 3SECh. 2 - Prob. 4SECh. 2 - Prob. 5SECh. 2 - Prob. 6SECh. 2 - Prob. 7SECh. 2 - Prepare a general journal form like the one in...Ch. 2 - Prepare three ledger account forms like the one in...Ch. 2 - Prob. 10SECh. 2 - Prob. 11SECh. 2 - Prob. 12SECh. 2 - Which of the following events would be recognized...Ch. 2 - You are given the following list of accounts with...Ch. 2 - The following ledger accounts are for Afocentric...Ch. 2 - Prob. 4EACh. 2 - The accounts that follow are applicable to Harolds...Ch. 2 - Prob. 6EACh. 2 - Prob. 7EACh. 2 - Prob. 8EACh. 2 - After recording the transactions in E6A, prepare a...Ch. 2 - The list that follows presents Shah Companys...Ch. 2 - Which of the following errors would cause a trial...Ch. 2 - Prob. 12EACh. 2 - Record the transactions in E6A in the general...Ch. 2 - Prob. 14EACh. 2 - Prob. 15EACh. 2 - Prob. 16EACh. 2 - Highland Design Company creates radio and...Ch. 2 - The following accounts are applicable to Georges...Ch. 2 - Jennifer Lopez opened a school for administrative...Ch. 2 - Sid Patel bid for and won a concession to rent...Ch. 2 - Nordtown Company is a marketing firm. The companys...Ch. 2 - Prob. 6APCh. 2 - The following accounts are applicable to Raymonds...Ch. 2 - Prob. 8APCh. 2 - David Roberts began an upholstery cleaning...Ch. 2 - Prob. 10APCh. 2 - Prob. 1CCh. 2 - Prob. 2CCh. 2 - Prob. 3CCh. 2 - Prob. 4CCh. 2 - Prob. 5CCh. 2 - Prob. 6CCh. 2 - Prob. 7C
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- To what extent do you consider the following items to be proper costs of the fixed asset? Give reasons for your opinions. a. Overhead of a business that builds its own equipment. b. Cash discounts on purchases of equipment. c. Interest paid during construction of a building. d. Cost of a safety device installed on a machine. e. Freight on equipment returned before installation, for replacement by other equipment of greater capacity. f. Cost of moving machinery to a new location. g. Cost of plywood partitions erected as part of the remodeling of the office. h. Replastering of a section of the building. i. Cost of a new motor for one of the trucks.arrow_forwardCosts that are treated as assets until the product is sold arearrow_forwardThe maintenance cost of a machine used in manufacturing process are not included in the cost of inventories.TRUE or FALSEarrow_forward
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- Which of the following expenditures would be included in the cost of a fixed asset? Oa. Sales taxes Ob. Vandalism Oc. Uninsured theft Od. Mistakes in installationarrow_forwardWhat is the cost of the building? What is the cost of machinery and equipment?arrow_forwardWhat is factory equipment an example of? A. A liability B. Revenue C. An expense D. An assetarrow_forward
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