Question

The costs of maintenance and repair of an asset after it has been placed in service​ ________.

A. are added to the capital cost of an asset
B. are either expensed or added to the capital cost of an​ asset, depending on the nature of the costs in question
C. are subject to the​ company's choice to either expense the maintenance and repair costs of an asset or add those costs to the capital cost
D. are expensed

Answer 1

Maintenance and repair costs for an asset, after it is in service, are usually expensed as they do not increase the value or life of the asset, unlike capital expenditures which are long-term investments.

Step-by-step explanation:

The costs of maintenance and repair of an asset after it has been placed in service are expensed. These costs are generally considered part of the ongoing operational costs necessary to keep an asset in service and are not added to the capital cost of an asset. This treatment is because they do not typically enhance the asset's value or extend its useful life, but simply allow the asset to continue operating as expected. In contrast, capital expenditures are fixed costs that are invested in the long term for the creation, upgrade, or maintenance of the asset, and impact the value or life of the asset substantially.