Question
Scott Drilling Company owns an oil and gas drilling rig. The company is continually spending money to repair, maintain, refurbish, and upgrade this unit. Below
Scott Drilling Company owns an oil and gas drilling rig. The company is continually spending money to repair, maintain, refurbish, and upgrade this unit. Below is a listing of various costs incurred. Indicate, by placing check marks in the appropriate boxes, if each cost is a "capital" or "revenue" expenditure. If a capital item, indicate whether the cost is more likely considered to be a "replacement" or a "betterment." CLASSIFICATION: FOR CAPITAL ITEMS: Capital Revenue Replacement Betterment Routine cleaning and repainting Replace of expensive cables and pulleys Addition of directional drilling motor Safety inspection fee Raising and lowering rig at each new drill site Interest cost on loan to buy rig Installation of additional advanced lighting system technology Turntable, deck, and bearings in place of similar worn out unit Lubrication of all moving parts Welding broken outrigger mount Installation of anti-slip flooring on all smooth surface walk ways
CLASSIFICATION: FOR CAPITAL ITEMS: Capital Revenue Replacement Betterment Routine cleaning and repainting Replace of expensive cables and pulleys Addition of directional drilling motor Safety inspection fee Raising and lowering rig at each new drill site Interest cost on loan to buy rig Installation of additional advanced lighting system technology Turntable, deck, and bearings in place of similar worn out unit Lubrication of all moving parts Welding broken outrigger mount Installation of anti-slip flooring on all smooth surface walk ways
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