Distinguishing capital expenditures from expenses [5-10 min]
Consider the following expenditures:
a. Purchase price.
b. Ordinary recurring repairs to keep the machinery in good working order.
c. Lubrication before machinery is placed in service.
d. Periodic lubrication after machinery is placed in service.
e. Major overhaul to extend useful life by three years.
f. Sales tax paid on the purchase price.
g. Transportation and insurance while machinery is in transit from seller to buyer.
h. Installation.
i. Training of personnel for initial operation of the machinery.
j. Income tax paid on income earned from the sale of products manufactured by the machinery.
Requirement
1. Classify each of the expenditures as a capital expenditure or an expense related to machinery.
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