Which of the following costs associated with a delivery van should be capitalized? I. The van is repainted.
II) The van's transmission is completely overhauled to extend useful life for two years.
III) The van is modified for a specific use.
A) I and II
B) I and III
C) II and III
D) All of these answers are correct.

Question

Quizplus · Accepted Answer

Only costs that improve or extend the useful life of an asset should be capitalized, not routine maintenance or repairs (which would be expensed).

The cost of repainting the van is a routine maintenance cost and would be expensed.

However, overhauling the transmission to extend its useful life and modifying the van for a specific use both improve the van's usefulness for future periods. Therefore, these costs should be capitalized.

Which of the Following Costs Associated with a Delivery Van