The cost of a major addition to an operational asset should be recorded as an asset and depreciated over its useful life.

Question

Quizplus · Accepted Answer

The cost of a major addition to an operational asset should be capitalized as an asset and depreciated over its useful life. This treatment is in accordance with the matching principle of accounting, as it spreads the cost of the addition over the periods in which it is expected to generate benefits for the company.

The Cost of a Major Addition to an Operational Asset