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Assume Plastic Products, Inc., purchased conveyor-belt machinery. Classify each of the following expenditures as a capital expenditure or an immediate expense related to machinery: a. Sales tax paid on the purchase price b. Transportation and insurance while machinery is in transit from seller to buyer c. Purchase price d. Installation e. Training of personnel for initial operation of the machinery f. Special reinforcement to the machinery platform g. Income tax paid on income earned from the sale of products manufactured by the machinery h. Major overhaul to extend the machinery’s useful life by five years i. Ordinary repairs to keep the machinery in good working order j. Lubrication of the machinery before it is placed in service k. Periodic lubrication after the machinery is placed in service

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Question

Assume Decadent Delights, Inc., purchased conveyor-belt machinery. Classify each of the following expenditures as a capital expenditure or an immediate expense related to machinery: a. Sales tax paid on the purchase price b. Transportation and insurance while machinery is in transit from seller to buyer c. Purchase price d. Installation e. Training of personnel for initial operation of the machinery f. Special reinforcement to the machinery platform g. Income tax paid on income earned from the sale of products manufactured by the machinery h. Major overhaul to extend the machinery’s useful life by four years i. Ordinary repairs to keep the machinery in good working order j. Lubrication of the machinery before it is placed in service k. Periodic lubrication after the machinery is placed in service

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In this problem, we are asked to distinguish capital expenditures from expenses. Let's understand what is capital expenditures and expenses and then we can classify them one by one.