Acme enterprises just bought a new manufacturing machine. which of these costs should be capitalized? (check all that apply.)
a. the $200 annual increase in personal property taxes, based on the cost of the machine
b. the $500 annual increase in insurance premiums, based on the cost of the machine
c. the $100 increase in monthly utility bills to operate the machine
d. the $500,000 invoice price of the machine
e. the $15,000 freight bill to deliver the machine to acme's factory
f. the $8,000 cost of tearing down acme's factory wall to get the machine inside

Option D, E and F. See below for information.

Explanation:

Costs are capitalized when they form a principal part of the asset. These costs may include any costs that are needed to make the asset operational and any costs that are incurred to bring the asset to operating premises.

As such the $15,000 freight bill that brings the asset in premises, the invoice price of $500,000 which comprises the cost of the capital asset and the one time cost of $8,000 to tear down the wall and install the asset are all capital costs and are to be capitalized in the final cost of the asset to be recorded.

All other are annual expenses are not to be capitalized (Option a, b and c)

Hope that helps.

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