Design a concept map that compares and contrasts the

Accounting 2010 Chapter 9 Part 2 Notes  Subsequent Expenditures o After all costs capitalized o After the asset has started being used o How do you determine whether to debit the subsequent expenditure for the asset or expense it  2 questions to determine which should be done  Does it extend the useful life of the asset o If it does, capitalize the cost (debit asset)  Does it improve or enhance the quality of the output (sometimes called a betterment) o If it does, capitalize the cost (debit asset)  If the answer to both questions is no, expense the costs o Assets should be separated if they have different assumptions  Ex. if a company owns 3 trucks and each one uses a different depreciation method or has a different intended use/output assumption, then each truck would have to be accounted for separately  Examples of subsequent expenditures o Costs that could be capitalized  Most things that increase the salvage value of the asset are costs that are capitalized  New engines for machinery  Additions such as adding a tow hitch to a truck or getting better hard drives for a company’s computers to make them faster and therefore more efficient o Costs that would be expensed  If a cost does not increase the asset’s value and is not a visible change to the asset, it’s probably an expense  Regular maintenance costs  Gas or oil for automobiles  Replacing broken parts on machines  Insurance  Car washes