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Determine if ups should capitalize cost of converting trucks

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Reference no: EM132915346

ASSUME IT IS EARLY 2018:

UPS is working with the New York State Energy Research and Development Authority to develop new technology that will allow UPS to convert its diesel-fueled delivery trucks to electric-fueled. UPS hopes to have a working model of the converted delivery truck ready sometime in 2018. The plan is to convert 1,500 of the company's delivery vehicles in New York City, representing 66% of its fleet there, by the year 2022.

UPS wants to convert its fleet to be all-electric because electric-fueled trucks eliminate harmful emissions, noise, and dependence on fossil fuels. UPS drivers will use the electric trucks during the day and recharge them overnight.

Problem 1: What is the difference between capitalizing an expenditure versus expensing that expenditure?

Problem 2: What information would you need to be able to determine if UPS should capitalize or expense the cost of converting the trucks to be all-electric?

Problem 3: Do you think UPS will capitalize or expense the cost of converting to electric vehicles?

Reference no: EM132915346

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