Capitalizing or expensing costs has an effect on the financial statements. They also affect the organizations bottom line.

Costs incurred to purchase a plant asset increase the useful life or enhance the quality of a fixed asset. They are generally capitalized. In other words, the basis of the fixed asset is increased.

• How do capital expenditures such as plant assets differ from ordinary costs that are expensed on the income statement
  • What is the impact on the financial statements if a capital expenditure is immediately expensed in error?
• Provide an example of a plant asset that you may have seen at your job or a business you have visited.

Select 2 of your classmates' posts, and respond to them using 1 of the following prompts:

• Do you agree with your classmates analysis of capitalized costs?
• What methods could be used to depreciate the plant asset that your classmate discussed?