Final answer:
Replacing electrical wiring in a building is typically capitalized, which involves recording the cost as an asset and depreciating it over the useful life of the improvement.
Step-by-step explanation:
When determining whether to expense or capitalize the cost of replacing electrical wiring throughout a building, it is important to consider how the expenditure should be recorded on financial statements. Replacing the wiring is a significant improvement which extends the life and enhances the value of the building. This cost is typically capitalized, meaning that it is recorded as an asset on the balance sheet and depreciated over the useful life of the improvement.
Capitalization of such costs is consistent with the matching principle, which aims to match expenses with the revenues they help to generate. In this case, the benefit of the new wiring will likely be spread over several years, hence depreciation will occur over that period. Capitalizable costs may also include direct labor and any other costs directly attributable to the installation of the new wiring.