An automobile manufacturer replaces a major component of a machine used in its assembly line. This cost should be expensed in the current period.Group startsTrue or False
Question
An automobile manufacturer replaces a major component of a machine used in its assembly line. This cost should be expensed in the current period.Group startsTrue or False
Solution
False. The cost of replacing a major component of a machine used in the assembly line is typically capitalized, not expensed in the current period. This is because the replacement extends the useful life of the machine and improves its functionality, which are characteristics of a capital expenditure. The cost will then be depreciated over the useful life of the component.
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