Classifying expenditures related to machinery


Response to the following problem:

Classify each of the following expenditures as a capital expenditure or an expense related to machinery:

(a) purchase price;

(b) ordinary recurring repairs to keep the machinery in good working order;

(c) lubrication of the machinery before it is placed in service;

(d) periodic lubrication after the machinery is placed in service;

(e) major overhaul to extend useful life by three years;

(f) sales tax paid on the purchase price;

(g) transportation and insurance while machinery is in transit from seller to buyer;

(h) installation;

(i) training of personnel for initial operation of the machinery; and

(j) income tax paid on income earned from the sale of products manufactured by the machinery.

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Accounting Basics: Classifying expenditures related to machinery
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