Jada Company had the following transactions during theyear:• Purchased a machine for $500,000 using a long-termnote to finance it• Paid $1,000 for ordinary repair• Purchased a patent for $42,000 cash• Paid $210,000 cash for addition to an existing building• Paid $55,000 for monthly salaries• Paid $300 for routine maintenance on equipment• Paid $10,000 for extraordinary repairsIf all transactions were recorded properly, what amount didJada capitalize for the year, and what amount did Jadaexpense for the year?Capitalized$4Expensed

Capitalized Cost: Capitalized cost is an expense that is added to the cost basis of fixed assets on a company's balance sheet. Capitalized costs are not expensed in the period they were incurred but recognized over a period of time via depreciation or amortization. Expense Incurred: An incurred expense is a cost that a business incurs when it purchases goods or services on credit. For example, the purchase may be made either through credit. Let us go through each of the transactions and discuss which one of them will be accounted for as capitalized cost or expense incurred. Transaction 1: Paid for an ordinary repair of $1,000. Ordinary repairs are considered an expense. It does not increase the value of the assets or extends the assets' life. They are accounted for as a repairs expense account. Therefore, Ordinary repairs expense will be considered as Expenses of $1,000. Transaction 2: Purchased a patent for $42,000 cash. A patent is an intangible asset, which is grants a manufacturing and research company control over the use and sale of a specific design. Therefore, the patent will be considered as Capitalized cost of $42,000. Transaction 3: Payment for the extension of the building of $210,000 The building is considered a fixed asset that is capitalized in the balance sheet of a company. When there is a payment for the extension of a building, they are considered as an asset which increases the value of the asset. Therefore, the extension of the building paid is considered as a capitalized cost of $210,000. Transaction 4: Payment of Salaries of $55,000. In accounting, salaries are accounted for as payroll accounts. Salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed. It is paid at monthly intervals or weekly intervals. Therefore, the salaries are considered an expense of $210,000. Transaction 5: Routine Maintenance paid on Equipment of $300. Maintenance expenses are costs incurred for the routine maintenance of an asset to keep it in its original working condition. Maintenance expense is recorded in the income statement, thus reducing the profit of the accounting period. Therefore, routine maintenance will be considered an expense of $300. Transaction 6: Extraordinary repairs paid of $10,000. Extraordinary repairs are capitalized expenses that increase the future depreciation of an asset over the remainder of its useful life. Extraordinary repairs must extend the useful life of the asset beyond one year, and the value of the repair must be materially significant. Therefore, the extraordinary repairs will be considered as an expense of $10,000. As we have discussed, let us now compute the capitalized costs and expense costs of J Company for the year as under: Capitalized Costs: Expenses: Conclusion: To conclude, the capitalized costs that are accounted for in the books of J Company is $262,000 and the expenses costs are $56,300.