Acme Enterprises just bought a new manufacturing machine.Which of these costs should not be capitalized?
A) The $500,000 invoice price of the machine
B) The $15,000 freight bill to deliver the machine to Acme's factory
C) The $8,000 cost of tearing down Acme's factory wall to get the machine inside
D) The $100 increase in monthly utility bills to operate the machine

Question

Quizplus · Accepted Answer

The invoice price of the machine (A), the freight bill (B), and the cost of tearing down the factory wall (C) are all costs directly related to acquiring and getting the machine ready for use. These costs should be capitalized and added to the cost of the machine to determine its total cost. However, the increase in monthly utility bills (D) is an ongoing operating expense and should not be capitalized as part of the cost of the machine.

Acme Enterprises Just Bought a New Manufacturing Machine