Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 9-1

Purpose:

(L.O. 1, 3) This exercise will help you identify which expenditures should be capitalized (debited to a balance sheet account) and which should be expensed (charged to an income statement account).

TIP: Remember that expenditures which benefit the company for more than the current accounting period should be capitalized in order to properly match expenses with revenues over successive accounting periods. Expenditures for items that do not yield benefits beyond the current accounting period should be expensed.

Instructions

Assume all amounts are material (significant). For each of the following independent items, indicate by use of the appropriate letter if it should be:

C for Capitalized

or

E for Expensed

________	1. Invoice price of drill press.
________	2. Sales tax on computer.
________	3. Costs of permanent partitions constructed in office building.
________	4. Installation charges for new conveyer system.
__________	5. Costs of trees and shrubs planted in front of office building.
__________	6. Cost of surveying new land site to determine property boundaries.
_________	7. Costs of major overhaul of delivery truck which extends the life of the truck.
_________	8. Costs of constructing new counters for show room.
_________	9. Costs of powders, soaps, and wax for office floors.
___________	10. Cost of janitorial services for office and show room.
__________	11. Costs of carpets in a new office building.
_________	12. Costs ...