Scott Drilling Company owns an oil and gas drilling rig. The company is continua

Question

Scott Drilling Company owns an oil and gas drilling rig. The company is continually spending money to repair, maintain, refurbish, and upgrade this unit. Below is a listing of various costs incurred. Indicate, by placing check marks in the appropriate boxes, if each cost is a "capital" or "revenue" expenditure. If a capital item, indicate whether the cost is more likely considered to be a "replacement" or a "betterment."
CLASSIFICATION: FOR CAPITAL ITEMS:
Capital Revenue Replacement Betterment

Routine cleaning and repainting
Replace of expensive cables and pulleys
Addition of directional drilling motor
Safety inspection fee
Raising and lowering rig at each new drill site
Interest cost on loan to buy rig
Installation of additional advanced lighting system technology
Turntable, deck, and bearings in place of similar worn out unit
Lubrication of all moving parts
Welding broken outrigger mount
Installation of anti-slip flooring on all smooth surface walk ways

CLASSIFICATION: FOR CAPITAL ITEMS:
Capital Revenue Replacement Betterment

Routine cleaning and repainting
Replace of expensive cables and pulleys
Addition of directional drilling motor
Safety inspection fee
Raising and lowering rig at each new drill site
Interest cost on loan to buy rig
Installation of additional advanced lighting system technology
Turntable, deck, and bearings in place of similar worn out unit
Lubrication of all moving parts
Welding broken outrigger mount
Installation of anti-slip flooring on all smooth surface walk ways

Explanation / Answer

classification

For capital items

capital

revenue

replacement

betterment

1-

Routine cleaning and repainting

Yes

2-

Replace of expensive cables and pulleys

yes

yes

3-

Addition of directional drilling motor

Yes

yes

4-

Safety inspection fee

yes

5-

Raising and lowering rig at each new drill site

yes

6-

Interest cost on loan to buy rig

Yes

7-

Installation of additional advanced lighting system technology

yes

yes

8-

Turntable, deck, and bearings in place of similar worn out unit

yes

yes

9-

Lubrication of all moving parts

yes

10-

Welding broken outrigger mount

yes

11-

Installation of anti-slip flooring on all smooth surface walk ways

yes

yes

classification

For capital items

capital

revenue

replacement

betterment

1-

Routine cleaning and repainting

Yes

2-

Replace of expensive cables and pulleys

yes

yes

3-

Addition of directional drilling motor

Yes

yes

4-

Safety inspection fee

yes

5-

Raising and lowering rig at each new drill site

yes

6-

Interest cost on loan to buy rig

Yes

7-

Installation of additional advanced lighting system technology

yes

yes

8-

Turntable, deck, and bearings in place of similar worn out unit

yes

yes

9-

Lubrication of all moving parts

yes

10-

Welding broken outrigger mount

yes

11-

Installation of anti-slip flooring on all smooth surface walk ways

yes

yes

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