Analysis of Subsequent Expenditures Plant assets often requires expenditures subsequent to acquisition. It is important that they

Question:

Analysis of Subsequent Expenditures Plant assets often requires expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the balance sheets and income statements for a number of years. For each of the following items, indicate whether the expenditure should be capitalized (C) or expensed (E) in the period incurred.

(a) __________ Improvement.

(b) __________ Replacement of a minor broken part on a machine.

(d) __________ Expenditure that increases the efficiency and effectiveness of a productive asset but does not increase its salvage value.

(e) __________ Expenditure that increases the efficiency and effectiveness of a productive asset and increases the asset’s salvage value.

(f) __________ Ordinary repairs.

(g) __________ Improvement to a machine that increased its fair market value and its production capacity by 30% without extending the machine’s useful life.

(h) __________ Expenditure that increases the quality of the output of the productive asset.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...