Consider each of the items below. Place the proper letter in the blank space provided to indicate the nature of the account or accounts to be debited when recording each transaction using the preferred accounting treatment. Prepayments should be recorded in balance sheet accounts. Disregard income tax considerations unless instructed otherwise.
-On June 1, the Milton Hotel installed a sprinkler system throughout the building at a cost of $13,000. As a result the insurance rate was decreased by 40%.
A)asset(s) only
B)accumulated amortization, depletion, or depreciation only
C)expense only
D)asset(s) and expense
E)some other account or combination of accounts

Question

Quizplus · Accepted Answer

The new precision machine is considered an asset and should be capitalized on the balance sheet. The cost associated with setting up the machine, including the wages of the maintenance repair workers, are considered an expense and should be recorded on the income statement. Therefore, both the asset(s) and expense account(s) need to be debited.

Consider Each of the Items Below