Question

Capitalizing the cash cost of a piece of equipment is.

Answer 1

To capitalize the cash cost of a piece of equipment means to record it as an asset on a company's balance sheet instead of immediately expensing it as a cost.

Step-by-step explanation:

To capitalize the cash cost of a piece of equipment means to record it as an asset on a company's balance sheet, instead of immediately expensing it as a cost. This is done when the equipment is expected to provide future economic benefits over a long period of time. By capitalizing the cost, the company can spread the expense over the useful life of the equipment through depreciation.

For example, if a company buys a machine for $10,000 and expects it to last for 5 years, they may choose to capitalize the cost by recording it as a $10,000 asset on their balance sheet. Each year, they can then expense $2,000 ($10,000 divided by 5) as depreciation, reflecting the gradual reduction in the value of the machine over time.

Answer 2

converting it to an asset on the balance sheet.

Step-by-step explanation:

Capitalizing a cost means converting it to an asset on the balance sheet. For example, if a company pays $10,000 in cash for piece of equipment, its financial statements don't show that it "spent" $10,000. Rather, they show that it converted $10,000 worth of cash into $10,000 worth of equipment, an asset.