All of the following payments were made by UIB Co.for machinery the company bought and used during the year.Which of these expenditures should NOT be capitalized?
A)a payment made to install the machinery at the factory
B)the cost of electricity to operate the machine for the first year of use
C)the cost of insurance while the machine was in transit from the seller's warehouse
D)the costs of testing the machine in preparation for use

Question

Quizplus · Accepted Answer

Only expenditures that directly enhance the life or efficiency of the machinery should be capitalized. The cost of electricity to operate the machine for the first year of use is considered an expense since it is not a direct cost related to acquiring or installing the machinery. The rest of the choices directly relate to the acquisition or installation of the machinery, so they should be capitalized.

All of the Following Payments Were Made by UIB Co