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Capitalizing a trash can

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There was a purchase of a trash can that is likely to last for five years. Argue for or against the capitalization of the trash can and defend your own position in relation to objective of financial reporting and qualitative characteristics of accounting information.

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Solution Summary

This solution explains if it would be feasible or justified to depreciate a trash can that has an expected life of five years. A thorough discussion is provided.

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There are several things that need to be considered in answering this question. According to GAAP, the asset must provide some type of economic benefit. Buildings, plants, equipment, vehicles, tools, and other such assets are perfect examples of this principle. Also, an asset that is capitalized is generally used in the company's operations. This leads us to the point that the trash can may be used in a production room or other type of operations center. One of the main questions that is not addressed is the price of the trash can. We know that the trash can is likely to last five years. We also have rulers, staplers, an inventory of office paperclips, paper plates, break room paper cups and other items that can ...

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