Question

Identify which of the following expenditures is considered as a capital expenditure that must be depreciated (capitalized).

A) Purchased a new computer system for $3,750.
B) Purchased a patent on an energy-saving device over six years at a cost of $32,000.
C) Installed a conveyor belt system to automate some part of a production processes for $17,000.
D) Paid $18,000 to lease a dump truck for eight months.
E) Installed a water dispenser in a company dining area for $2,750.
F) Repaved a parking lot for $16,000.
G) Purchased a fax machine for $2,500.
H) Purchased a spare part for a framing machine for $4,250.
I) Painted the warehouse building, both interior and exterior, for $20,500.
J) Purchased land to build a new facility for $350,000.

Answer 1

A. A computer system -It is a capital expenditure that depreciates when used.

C. Expenditure on Conveyor belt. -It is a capital expenditure that gets depreciated due to the wear and tear in the process of production.

E. Expenditure on water dispenser - It is a capital expenditure that depreciates over a period of time due to prolonged use.

F.Expenditure for repaving the parking lot -It is a capital expenditure that depreciates due to continuous use.

G.Expenditure on fax machine.-It is a capital expenditure that depreciates.

H. Expenditure on spare part of a machine- It depreciates over a period of time.

I. Expenditure on painting.-It is an expenditure that depreciates.

B.*Expenditure on patent is a capital expenditure ,but does not depreciate.

D*.Expenditure on lease is a capital expenditure but does not depreciate.

J.*Expenditure on land is a capital expenditure but does not depreciate.