{"id":36027,"date":"2024-04-27T12:14:58","date_gmt":"2024-04-27T12:14:58","guid":{"rendered":"https:\/\/www.greatassignmenthelp.com\/questions\/?p=36027"},"modified":"2024-04-27T12:14:58","modified_gmt":"2024-04-27T12:14:58","slug":"per-company-policy-tools-with-a-purchase-price-greater-than-1000-are-capitalized","status":"publish","type":"post","link":"https:\/\/www.greatassignmenthelp.com\/questions\/per-company-policy-tools-with-a-purchase-price-greater-than-1000-are-capitalized\/","title":{"rendered":"Per company policy, tools with a purchase price greater than $1,000 are capitalized"},"content":{"rendered":"<p data-pm-slice=\"1 1 []\"><strong>Per company policy, tools with a purchase price greater than $1,000 are capitalized. What&#8217;s the correct entry to record a tool purchase of $500?<\/strong><\/p>\n<p>A) Debit fixed assets $1000, Credit cash $1,000<\/p>\n<p>B) Debt fixed asset $500, Credit tools expense $500<\/p>\n<p>C) Debt fixed asset $500, Credit cash $500<\/p>\n<p>D) Debt tools expense $1,000, Credit cash $1,000<\/p>\n<p>E) Debt tools expense $500, Credit cash $500<\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\"><strong>Answer: <\/strong>E) Debt tools expense $500, Credit cash $500<\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><strong><span lang=\"en-US\">Explanation:<\/span><\/strong><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">Fixed assets capitalization guidelines, as per company policy, includes all tools individually purchased for more than a thousand bucks. Because of the purchase price value of this asset in this case is being $500 that is also lower than $1,000 therefore this asset should be treated as an expense item instead of a fixed asset.<\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">The double-entry accounting entry to record the purchase of a tool for $500 would be: <\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">Debit: Tools Expense $500 (entry to debit the cost of the tools as an expense)<\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">Credit: Cash $500 (the refrigerator will be recorded with EFT)<\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">The entry moves the amount into the tools expense account, which is included under the income statement expenses, simultaneously deducting the sum from the cash account which is its counterpart on the balance sheet asset column.<\/span><\/p>\n<p class=\"western\" lang=\"en-GB\"><span lang=\"en-US\">A reason behind why the tool in is question is to be expensed is that its expected useful life is less than the company\u2019s capitalization threshold of one year (or the year\u2019s end). The amount spent on it should be factored in as a yearly expenditure in the current time period as opposed to being depreciated over the tool\u2019s useful life.<\/span><a name=\"_GoBack\"><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Per company policy, tools with a purchase price greater than $1,000 are capitalized. What&#8217;s the correct entry to record a tool purchase of $500? A) [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v23.5 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Per company policy, tools with a purchase price greater than $1,000 are capitalized<\/title>\n<meta name=\"description\" content=\"Per company policy, tools with a purchase price greater than $1,000 are capitalized. 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