Warrick Water Company, a privately owned business, supplies water to several communities. Warrick has just performed an extensive overhaul on one of its water pumps. The overhaul is expected to extend the life of the pump by 10 years. The residual value of thepump is unchanged. You have been asked to determine which of the following costs should be capitalized as a part of this overhaul. Those costs not capitalized should be expensed.Required:Conceptual Connection: Classify each cost as part of the overhaul or as an expense.New pump motorRepacking of bearings (performed monthly)New impeller (rotating component of a pump)Painting of pump housing (performed annually)Replacement of pump foundationNew wiring (needed every 5 years)Installation labor, motorInstallation labor, impellerInstallation labor, wiringPaint labor (performed annually)Placement of fence around pump*ČA requirement of the Occupational Safety and Health Administration that will add to maintenance costs over the remaining life of the pump.)DrovioucNovt

The cost of asset is only recognized when it will flow future economic benefit to the entity and the…

Warrick Water Company, a privately owned business, supplies water to several communities. Warrick has just performed an extensive overhaul on one of its water pumps. The overhaul is expected to extend the life of the pump by 10 years. The residual value of the pump is unchanged. You have been asked to determine which of the following costs should be capitalized as a part of this overhaul. Those costs not capitalized should be expensed. Required: Conceptual Connection: Classify each cost as part of the overhaul as an expense. New pump motor Repacking of bearings (performed monthly) New impeller (rotating component of a pump) Painting of pump housing (performed annually) Replacement of pump foundation New wiring (needed every 5 years) Installation labor, motor Installation labor, impeller Installation labor, wiring Paint labor (performed annually) Placement of fence around pump ("A requirement of the Occupational Safety and Health Administration that will add to maintenance costs over the remaining life of the pump.)

Warrick Water Company, a privately owned business, supplies water to several communities. Warrick has just performed an extensive overhaul on one of its water pumps. The overhaul is expected to extend the life of the pump by 10 years. The residual value of the pump is unchanged. You have been asked to determine which of the following costs should be capitalized as a part of this overhaul. Those costs not capitalized should be expensed. Required: Conceptual Connection: Classify each cost as part of the overhaul as an expense. New pump motor Repacking of bearings (performed monthly) New impeller (rotating component of a pump) Painting of pump housing (performed annually) Replacement of pump foundation New wiring (needed every 5 years) Installation labor, motor Installation labor, impeller Installation labor, wiring Paint labor (performed annually) Placement of fence around pump ("A requirement of the Occupational Safety and Health Administration that will add to maintenance costs over the remaining life of the pump.)

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter3: Cost Behavior

Section: Chapter Questions

Problem 13E

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