Question

Indicate whether or not each expenditure would be included in the cost of acquisition for each item below. The answer box provides two options, Yes (if the expenditure would be included ) or No, (if the expenditure would not be included.) Group of answer choices Cost testing materials and labor in testing a purchased machine before use Yes Compensation for injury to construction worker [ Choose ] Cost of overhaul to a used machine purchased before initial use [ Choose ] Cost of tearing down a building on newly acquired land [ Choose ] Repairs to a new machine damaged while moving it into place for use.

Answer 1

Cost testing materials and labor in testing a purchased machine before use

Answer: Yes

Reason: The cost of materials and labor used in testing a machine can be capitalized.

Compensation for injury to construction worker

Answer: No

Reason: Compensation for injury to construction worker is not a capitalized expense.

Cost of overhaul to a used machine purchased before initial use

Answer: Yes

Reason: Cost of overhaul is a Capital expense because it was required to bring the machine to usable condition.

Cost of tearing down a building on newly acquired land

Answer: Yes

Reason: Cost of Tearing down a building is considered as capital cost for Land and should be added to the Land account.

Repairs to a new machine damaged while moving it into place for use

Answer: No

Reason: Repair costs are generally not capitalized.