Dick Gaines owns and operates Gaines Print Co. During February, Gaines Print Co. incurred the following costs in acquiring two printing presses

Dick Gaines owns and operates Gaines Print Co. During February, Gaines Print Co. incurred the following costs in acquiring two printing presses. One printing press was new, and the other was used by a business that recently filed for bankruptcy.

Costs related to new printing press:
1. Fee paid to factory representative for installation
2. Freight
3. Insurance while in transit
4. New parts to replace those damaged in unloading
5. Sales tax on purchase price
6. Special foundation

Costs related to used printing press:

7. Fees paid to attorney to review purchase agreement
8. Freight
9. Installation
10. Repair of damage incurred in reconditioning the press
11. Replacement of worn-out parts
12. Vandalism repairs during installation
a. Indicate which costs incurred in acquiring the new printing press should be debited to the asset account.
b. Indicate which costs incurred in acquiring the used printing press should be debited to the asset account.


Answer:
a. New printing press: 1, 2, 3, 5, 6
b. Used printing press: 7, 8, 9, 11




Huffine Lines Co. incurred the following costs related to trucks and vans used in operating its delivery service:

1. Changed the oil and greased the joints of all the trucks and vans.
2. Changed the radiator fluid on a truck that had been in service for the past four years.
3. Installed a hydraulic lift to a van.
4. Installed security systems on four of the newer trucks.
5. Overhauled the engine on one of the trucks purchased three years ago.
6. Rebuilt the transmission on one of the vans that had been driven 40,000 miles. The van was no longer under warranty.
7. Removed a two-way radio from one of the trucks and installed a new radio with a greater range of communication.
8. Repaired a flat tire on one of the vans.
9. Replaced a truck’s suspension system with a new suspension system that allows for the delivery of heavier loads.
10. Tinted the back and side windows of one of the vans to discourage theft of contents.

Classify each of the costs as a capital expenditure or a revenue expenditure.


Answer:
Capital expenditures: 3, 4, 5, 6, 7, 9, 10
Revenue expenditures: 1, 2, 8