Post-aquisition expenditures

Question 1

True or false? Only costs that cause an increase in the useful life of a plant asset are capitalized.

Answer 1

False

Question 2

Capitalized post-acquisition costs are not depreciated.
True
False

Answer 2

False

Question 3

What costs should be capitalized when they result in an increase in the productivity of the asset?

Answer 3

Purchase of additional equipment to original equipment
Installation
Replacement parts
Labor and overhead in connection with replacement of added equipment

Question 4

When should post acquisition expenditures be capitalized?

Answer 4

Post-acquisition expenditures, which increase the useful life (assuming normal maintenance) or the utility (usefulness or productivity) of the asset, are capitalized. Such expenditures provide value for more than one year. The original useful life of an asset assumes regular maintenance. Therefore, regular maintenance does not increase the intended useful life of the asset.