Question

Requirement 1. For each of the following​ items, identify whether the cost of the item would be expensed or capitalized at LimeBike​: a. Customized bikes from Trek and Specialized ▼ b. Development costs of LimeBike’s app for locating, paying, and returning bikes c. Salary of the salesperson who works to get cities to adopt LimeBike's program d. Replacement tires for bikes e. Routine bike maintenance including chain lubrication, brake pad replacement, and drivetrain cleaning f. Electricity and other utilities in the company’s administrative offices

Answer 1

Answer:

Capitalized through inventory

a. Customized bikes from Trek and Specialized

d. Replacement tires for bikes

e. Routine bike maintenance including chain lubrication, brake pad replacement, and drive train cleaning

Expenses:

b. Development costs of Lime Bike’s app for locating, paying, and returning bikes

c. Salary of the salesperson who works to get cities to adopt Lime Bike's program

f. Electricity and other utilities in the company’s administrative offices

Explanation:

The cost can be capitalized when they are part of the finished good production process.

These cost are: direct material, direct labor and factory overhead.

While cost of the period (expenses) will be all the other cost which aren't part of the direct materials, direct labor and manufacturing overhead.

The sales person is part of the selling department, not factory so it is expense.

the utilities bill for office which aren't factory are also expenses.

The development cost will be amortize through time. are not capitalized.