Classic Case from the Business Press A news story concerning urga stated: Yet the $7.5 billion that John J. Riccardo, its money man, estimates the company will need to finance a recovery over the next five years is huge by any standard. But, says Riccardo, "half is charged to the P&L [profit and loss] as incurred, so we're looking for $3.75 billion. Of that, about 60% will be recovered in depreciation and amortization. That leaves a balance of $1.5 billion over the five years, to be financed through earn- ings, borrowings, and divestitures. Over the period, that overall number is manageable." Explain or comment on the following: 1. "Half is charged to the P&L as incurred, so we're looking for $3.75 billion." 2. "Of that, about 60% will be recovered in depreciation and amortization." 847 Capital Expenditures Consider the following transactions:

a. Acquired building for a down payment plus a mortgage payable.

b. Paid plumbers for repair of leaky faucets.

c. Acquired new air-conditioning system for the building.

d. Paid interest on building mortgage.

e. Paid principal on building mortgage.

f. Paid cash dividends. g. Replaced damaged front door (not covered by insurance). h. Paid travel expenses of sales personnel. i. Paid janitorial wages. j. Paid security guard's wages. Required Answer by letter: 1. Indicate which transactions are capital expenditures. 2. Indicate which transactions are expenses in the current year.