A is corrent. The key factor in determining what costs Yvo should capitalize in connection with their assembly line project is whether the expenditures provide future benefit. In this case, all expenditures meet this criterion, and should therefore be capitalized for a total of $147,000 ($75,000 + $14,000 + $40,000 + $18,000). The cost of the machine and the labor to install it are proper additions to the equipment account. The labor costs are capitalized because they are necessary to ready the machine for its intended use. The parts added in rearranging the assembly line are expected to provide future benefits (as stated in the problem), and should therefore also be capitalized. The cost of labor and overhead to rearrange the assembly line is also capitalized, because the problem indicates that the rearrangement resulted in significantly more efficient production.
B is incorrect. The key factor in determining what costs Yvo should capitalize in connection with their assembly line project is whether the expenditures provide future benefit. In this case, all expenditures meet this criterion, and should therefore be capitalized for a total of $147,000 ($75,000 + $14,000 + $40,000 + $18,000). The cost of the machine and the labor to install it are proper additions to the equipment account. The labor costs are capitalized because they are necessary to ready the machine for its intended use. The parts added in rearranging the assembly line are expected to provide future benefits (as stated in the problem), and should therefore also be capitalized. The cost of labor and overhead to rearrange the assembly line is also capitalized, because the problem indicates that the rearrangement resulted in significantly more efficient production.
C is incorrect. The key factor in determining what costs Yvo should capitalize in connection with their assembly line project is whether the expenditures provide future benefit. In this case, all expenditures meet this criterion, and should therefore be capitalized for a total of $147,000 ($75,000 + $14,000 + $40,000 + $18,000). The cost of the machine and the labor to install it are proper additions to the equipment account. The labor costs are capitalized because they are necessary to ready the machine for its intended use. The parts added in rearranging the assembly line are expected to provide future benefits (as stated in the problem), and should therefore also be capitalized. The cost of labor and overhead to rearrange the assembly line is also capitalized, because the problem indicates that the rearrangement resulted in significantly more efficient production.
D is incorrect. The key factor in determining what costs Yvo should capitalize in connection with their assembly line project is whether the expenditures provide future benefit. In this case, all expenditures meet this criterion, and should therefore be capitalized for a total of $147,000 ($75,000 + $14,000 + $40,000 + $18,000). The cost of the machine and the labor to install it are proper additions to the equipment account. The labor costs are capitalized because they are necessary to ready the machine for its intended use. The parts added in rearranging the assembly line are expected to provide future benefits (as stated in the problem), and should therefore also be capitalized. The cost of labor and overhead to rearrange the assembly line is also capitalized, because the problem indicates that the rearrangement resulted in significantly more efficient production.
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