What is the definition of a capital asset?
A capital asset is an item that has a useful life of greater than one year and a unit cost of $5,000 or more. EXAMPLE 1: Department X purchases 10 computers, and the invoice total is $16,000. Although these assets meet the first criterion of having a useful life greater than one year, their per unit cost of $1,600 is less than the $5,000 minimum. These computers will be expensed in the year of purchase and not considered for capitalization. EXAMPLE 2: Department X purchases 1 computer with a cost of $16,000. This item is a capital asset under Drexel’s capitalization policy because it meets both the life and cost per unit criteria. Q) My department is getting ready to requisition the purchase of a capital asset. Are there certain accounts that I should use? A) Yes. The following accounts distinguish between the different types of capital assets and should be used when completing a purchase requisition.
