Superior,Inc.just bought a new machine to be used on its production line.Which of these costs should not be capitalized?
A)The $600,000 invoice price of the machine.
B)The $18,000 freight bill to deliver the machine to Superior's factory.
C)The $9,600 cost of tearing down Superior's factory wall to get the machine inside.
D)The $520 increase in annual insurance costs for the machine.

Question

Quizplus · Accepted Answer

The general rule for tangible assets under the cost principle is that all reasonable and necessary costs to acquire and prepare an asset for use should be recorded as a cost of the asset.The increase in annual insurance costs does not fit the criteria.