Answer:
a) an expense b) a capitalized cost c) a capitalized cost d) an expense e) a capitalized cost.
Explanation:
The question is to determine how the following transactions should be recorded based on capitalizing or expensing
a) $30,000 annual cost of repair and maintenance expenditures represents an expense, this is because it is not a cost associated to the usefulness or the estimated life use of the delivery vehicles, as such these cost cannot be capitalized
b) The $12,000,000 to develop a coal mine represents the initial cost of acquiring the asset (the coal mine). Usually, the cost of an asset is usually the cost of acquisition plus the set-up cost. From this coal mine revenue will be generated, hence this is a capitalized cost.
c) $248,000 roof replacement cost, this is capitalized and recorded as an asset cost because it will extend the useful life of the building which is an asset.
d) $140,000 cost of advertising campaign for a new product line should be recorded as an expense this is because it is part of advertising cost which is usually treated as expenses in the statement of income
e)$8,000 cost of grading and leveling land to construct a building will be treated as a capitalized cost because is part of the costs of getting the land (an asset) ready for its future use of erecting a building
