BCD Co. owns three (3) trucks, details for each truck at the end of the most recent year follow:

Asset Age Expected Useful Life Initial Cost Accumulated Depreciation

Truck 1 3 6 $22,500 $11,250

Truck 2 5 6 $26,250 $21,875

Truck 3 2 6 $28,500 $ 9,500

Additional Information:

A. At the beginning of the year, a hydraulic lift is added to Truck 1 at a cost of $4,500. The addition of the hydraulic lift will allow the company to deliver much larger objects than could previously be delivered.

B. At the beginning of the year, the engine of Truck 2 is overhauled at a cost of $5,000. The engine overhaul will extend the trucks useful life by three (3) years.

Write a short memo (note) to BCDs Chief Financial Officer (CFO) explaining the financial statement effects of the expenditures associated with Trucks 1 and 2.

Explain why these expenditures are considered revenue and or capital expenditure(s)?

How these Expenditures should be reported?

Can BCD expense all of these on the income statement during current year? Why? (Four to six paragraph and respond at least to one of your classmates for full credit.)