Capital versus Revenue Expenditures

On January 1, 2012, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2014:

• The building was painted at a cost of $5,000.
• To prevent leaking, new windows were installed in the building at a cost of $10,000.
• To improve production, a new conveyor system was installed at a cost of $40,000.
• The delivery truck was repainted with a new company logo at a cost of $1,000.
• To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.
• The truck's engine was overhauled at a cost of $4,000.

Required:

1. Determine which of those costs should be capitalized. Assume that all costs were incurred on January 1, 2014. Select "Yes" if the cost should be capitalized; otherwise select "No".

The building was painted at a cost of $5,000.	- Select your answer -YesNoCorrect 1 of Item 1
To prevent leaking, new windows were installed in the building at a cost of $10,000.	- Select your answer -YesNoCorrect 2 of Item 1
To improve production, a new conveyor system was installed in the building at a cost of $40,000.	- Select your answer -YesNoCorrect 3 of Item 1
The delivery truck was repainted with a new company logo at a cost of $1,000.	- Select your answer -YesNoCorrect 4 of Item 1
To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000.	- Select your answer -YesNoCorrect 5 of Item 1
The truck's engine was overhauled at a cost of $4,000.	- Select your answer -YesNoCorrect 6 of Item 1

Identify and analyze the effect of the capitalized costs on January 1, 2014 related to the building.

Activity	- Select your answer -OperatingInvestingFinancingCorrect 1 of Item 2
Accounts	- Select your answer -Building Increase, Cash IncreaseBuilding Increase, Cash DecreaseBuilding Decrease, Cash IncreaseBuilding Decrease, Cash DecreaseCorrect 2 of Item 2
Statement(s)	- Select your answer -Balance SheetIncome StatementBalance Sheet and Income StatementCorrect 3 of Item 2

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet		Income Statement
Assets	=	Liabilities	+	Stockholders' Equity		Revenues		Expenses	=	Net Income
- Select your answer -Accounts ReceivableAccumulated DepreciationBuildingDepreciation ExpenseRepairs and Maintenance ExpenseNo EntryCorrect 1 of Item 3		- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 3 of Item 3			- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 6 of Item 3		- Select your answer -Accounts ReceivableAccumulated DepreciationBuildingDepreciation ExpenseRepairs and Maintenance ExpenseNo EntryCorrect 8 of Item 3
- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 11 of Item 3		- Select your answer -Accumulated DepreciationCashDelivery ExpenseDelivery TruckRepairs and Maintenance ExpenseNo EntryCorrect 13 of Item 3			- Select your answer -Accumulated DepreciationCashDelivery ExpenseDelivery TruckRepairs and Maintenance ExpenseNo EntryCorrect 16 of Item 3		- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 18 of Item 3

Identify and analyze the effect of the capitalized costs on January 1, 2014 related to the delivery truck.

Activity	- Select your answer -OperatingInvestingFinancingCorrect 1 of Item 4
Accounts	- Select your answer -Delivery Truck Increase, Cash IncreaseDelivery Truck Increase, Cash DecreaseDelivery Truck Decrease, Cash IncreaseDelivery Truck Decrease, Cash DecreaseCorrect 2 of Item 4
Statement(s)	- Select your answer -Balance SheetIncome StatementBalance Sheet and Income StatementCorrect 3 of Item 4

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet		Income Statement
Assets	=	Liabilities	+	Stockholders' Equity		Revenues		Expenses	=	Net Income
- Select your answer -Accounts PayableAccumulated DepreciationBuildingsDelivery TruckDepreciation ExpenseNo EntryCorrect 1 of Item 5		- Select your answer -Accumulated DepreciationCashDelivery ExpenseDelivery TruckRepairs and Maintenance ExpenseNo EntryCorrect 3 of Item 5			- Select your answer -Accounts PayableAccumulated DepreciationBuildingsDelivery TruckDepreciation ExpenseNo EntryCorrect 6 of Item 5		- Select your answer -Accumulated DepreciationCashDelivery ExpenseDelivery TruckRepairs and Maintenance ExpenseNo EntryCorrect 8 of Item 5
- Select your answer -Accounts ReceivableAccumulated DepreciationBuildingsCashRepairs and Maintenance ExpenseNo EntryCorrect 11 of Item 5		- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 13 of Item 5			- Select your answer -Accounts PayableAccumulated DepreciationCashDelivery TruckDepreciation ExpenseNo EntryCorrect 16 of Item 5		- Select your answer -Accounts ReceivableAccumulated DepreciationBuildingsCashRepairs and Maintenance ExpenseNo EntryCorrect 18 of Item 5

2. Determine the amount of depreciation for the year 2014. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets. Round your intermediate calculations and answers to the nearest whole dollar.

Asset	2014 Depreciation
Building	$
Truck	$

Activity	- Select your answer -OperatingInvestingFinancingCorrect 1 of Item 7
Accounts	- Select your answer -Depreciation Expense Increase, Accumulated Depreciation - Building Decrease, Accumulated Depreciation - Truck DecreaseDepreciation Expense Increase, Accumulated Depreciation - Building Decrease, Accumulated Depreciation - Truck IncreaseDepreciation Expense Increase, Accumulated Depreciation - Building Increase, Accumulated Depreciation - Truck DecreaseDepreciation Expense Increase, Accumulated Depreciation - Building Increase, Accumulated Depreciation - Truck IncreaseCorrect 2 of Item 7
Statement(s)	- Select your answer -Balance SheetIncome StatementBalance Sheet and Income StatementCorrect 3 of Item 7

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account isincreased, it will have the effect ofdecreasingthe corresponding financial statement item.

Balance Sheet		Income Statement
Assets	=	Liabilities	+	Stockholders' Equity		Revenues		Expenses	=	Net Income
- Select your answer -Accumulated Depreciation-BuildingBuildingCashDepreciation ExpenseTruck ExpenseNo EntryCorrect 1 of Item 8		- Select your answer -Accumulated DepreciationCashDepreciation ExpenseTruck ExpenseNotes PayableNo EntryCorrect 3 of Item 8			- Select your answer -Accumulated Depreciation-BuildingBuildingCashDepreciation ExpenseTruck ExpenseNo EntryCorrect 6 of Item 8		- Select your answer -Accumulated DepreciationCashDepreciation ExpenseTruck ExpenseNotes PayableNo EntryCorrect 8 of Item 8
- Select your answer -Accumulated Depreciation-TruckBuildingCashDepreciation ExpenseTruckNo EntryCorrect 11 of Item 8		- Select your answer -Accumulated Depreciation-BuildingBuildingCashTruck ExpenseNotes PayableNo EntryCorrect 13 of Item 8			- Select your answer -Accumulated Depreciation-BuildingBuildingCashTruck ExpenseNotes PayableNo EntryCorrect 16 of Item 8		- Select your answer -Accumulated Depreciation-TruckBuildingCashNotes PayableTruckNo EntryCorrect 18 of Item 8

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3. Prepare a partial Balance Sheet to show how would the assets appear December 31, 2014.

Jose Company
Balance Sheet (Partial)
December 31, 2014
	$
		$
	$
Total property, plant, and equipment	$