Explanation Capitalized costs: Capitalized costs are considered as the part of fixed assets instead of stating them as expenses during the period in which they are incurred and capitalized costs are identified over a period of time through amortization or depreciation of fixed asset. Expense: Expenses are those which are incurred for the purpose of generating revenues from the main business activities during the current year. Particulars Capitalized or Expensed costs 1. Purchased a patent, $4,300 cash. Purchased a machine, $70,000; gave long-term note. C The capitalized costs are recorded as part of the cost of the asset while financing or constructing fixed assets and they are identified in future period of time. 2. Paid $10,000 for monthly salaries E This item is recorded as an expense, as it increases the revenue of the company in the current accounting period through business activities. 3. Paid cash dividends, $20,000 N Payment of cash dividend is neither capitalized cost, as it will be recorded as the part of the cost of the asset, nor expense, as it will not increase the revenue of the company in the current accounting period. 4. Purchased a machine, $7,000; gave a long-term note C The capitalized costs are recorded as part of the cost of the asset while financing or constructing fixed assets and they are identified in future period of time...

9th Edition

ISBN: 9781259738692

Author: Libby

Publisher: MCG

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Chapter 8, Problem 8.3ME

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Identify the correct letter to the left to show the type of expenditure for each of the following items.

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