For each of the items please give a \"yes\" or \"no\" Which of the following pur

Question

For each of the items please give a "yes" or "no"

Which of the following purchases would be considered capital nestments? Purchase item Capital investment? a. Land for the new administrative offices will cost $250,000. b. Salary costs for the upcoming year are projected to be $2,000,000. c. The cost of electricity and other utilities for the manufacturing facility is approximately $575,000 per year. d. The construction and installation of special-use machinery to produce a new model of washer is projected to cost $450,000 e. The new advertising campaign for the first quarter of the upcoming year will cost $175,000 f. Twelve new cars are purchased for a total of $300,000 to expand the fleet of cars used by the salespeople. g. New self-scan registers are purchased for all store locations at a total cost of $700,000 h. Anew network system throughout corporate headquarters will be installed for a cost of $200,000 i. The cost of paper and toner for the company printers is projected to be $150,000 for the upcoming year. J The purchase cost plus installation for a second extrusion machine in a plastics recycling firm will be $500,000

Explanation / Answer

Those assets are capitalized which have affect over more than one accounting period and the benefit of which would be available for more than accounting period. Expenses related to a specific year are expensed in that year itself and not capitalized.

a. Yes (benefit from this land would be available for a long time)

b. No (salary is Profit and loss account item)

c. No (these are direct expenses related to a particular year's production)

d. Yes ( benefit from this machine would be available for a longer time)

e. Yes (advertising campaigns give benefit over a longer period)

f. Yes (the benefit would be available for a long period)

g. Yes (benefit would be available for a long time)

h. Yes. (This is a software cost which will give benefit for a longer time)

i. No (these are regular priniting and stationery expenses incurred for a particular year)

j. Yes (machine will give benefit for a longer time)

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