DQ 2 Week 2 - expenses related to the fixed asset,...

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DQ 2 Week 2 The main criteria for capitalizing a fixed asset is to determine how many periods the asset will benefit. Some assets may only be used for one accounting period, while other fixed assets may have a useful life to the company of several years. A capitalized fixed asset must typically have a useful life of more than one year. The asset must be of significant value, it must not be changed or modified in any significant way during the asset's life, and if the asset becomes damaged, there must be a greater likelihood that the company will repair the asset instead of replacing the asset, due to the cost savings of repair vs. replace. The items that are included in the cost of a fixed asset are the cost of the actual asset, and all
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Unformatted text preview: expenses related to the fixed asset, including shipment, delivery, interest, and other costs related to preparing for the ownership of the fixed asset. Interest is included in the cost of a fixed asset, and should be, because GAAP requires that when the fixed asset is not being used, it accrues interest. If the asset is being prepared or modified to the company's specifications, the asset is not yet in use but is owned by the company. The amount of interest is added to the cost of the asset, even though it has yet to generate revenue from its intended use....
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