The cost of ordinary repairs to equipment during the first year of service is added to the Equipment account.Group startsTrue or False
Question
The cost of ordinary repairs to equipment during the first year of service is added to the Equipment account.
Group starts: True or False
Solution
Answer:
The statement is False.
Explanation:
In accounting, the cost of ordinary repairs and maintenance is usually classified as an expense rather than an asset. When equipment is acquired, its initial cost, including installation, is capitalized in the Equipment account. However, ordinary repairs that do not enhance the value or extend the useful life of the equipment are considered routine maintenance and should be expensed in the period they are incurred. This treatment adheres to the matching principle in accounting, which requires expenses to be recognized in the same period as the revenues they help generate. Therefore, such repairs do not increase the Equipment account.
Similar Questions
Repairs and maintenance expenditures that benefit future periods are capitalized as an asset.Group startsTrue or False
Maintenance charges of equipment debited to Equipment Account is an ________*1 pointError of commissionError of OmissionError of PrincipleNone of the above
Which one is an example of setup cost?Group of answer choicesBusiness insuranceTaxesRaw materials costCleaning previous materialsMachine depreciation
Expense should be recorded to recognize the cost of using long-lived assets, such as equipment, during the accounting period. (Enter one word per blank.)
Accrual of expenses will increase the expense element and will correspondingly increase the liabilityGroup of answer choicesTrueFalse
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.