1.) Capitalizing versus expensing For each of the following expenditures, indicate the type of account (asset or expense) in which the expenditure should be recorded.

Explain your answers.

a. $15,000 annual cost of routine repair and maintenance expenditures for a fleet

of delivery vehicles.

b. $60,000 cost to develop a coal mine, from which an estimated 1 million tons of

coal can be extracted.

c. $124,000 cost to replace the roof on a building.

d. $70,000 cost of a radio and television advertising campaign to introduce a new

product line.

e. $4,000 cost of grading and leveling land so that a building can be constructed.

2.) Basket purchase allocation Dorsey Co. has expanded its operations by pur-

chasing a parcel of land with a building on it from Bibb Co. for $90,000. The

appraised value of the land is $20,000, and the appraised value of the building is

$80,000.

Required:

a. Assuming that the building is to be used in Dorsey Co.