Plant assets often require expenditures subsequent to acquisition. It is important that they be accounted for properly. Any errors will affect both the statements of financial position and income statements for a number of years.

Instructions 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.

(c) __________ Expenditure that increases the useful life of an existing asset.

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

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

(f) __________ Ordinary repairs.

(g) __________ Improvement to a machine that increased its fair 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.