Capitalization Threshold - Capital
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The Town's fixed asset capitalization threshold is $5,000. For each item in the following list, please state whether the expense qualifies as "capital" and why:
a. A $500,000 new roof being added to an existing $5 million building
b. $12,000 for a rebuilt transmission for a bus (A new hybrid bus costs $450,000.)
c. $800 for tax and tags on a new police vehicle
d. $2,000 installation fee for a new emergency generator that costs $50,000
e. $7,000 worth of library books
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Solution Summary
In this solution we show whether a series of expenses qualify as capital and explain why or why not.
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a. A $500,000 new roof being added to an existing $5 million building:
Answer a: Yes: Since this is expansion of an asset and the benefit is expected more than a year, it must be capitalized.
b. $12,000 for a rebuilt ...
Education
- Chartered Accountant (Equivalent to CPA in US), Institute of Charted Accountants of India
- Bachelor of Commerce, West Bengal University
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