Stellar Pizza has a pizza–making robotic machine that was built by three former SpaceX engineers. More than 23 former SpaceX employees work at Stellar Pizza. The pizza–making robot can produce
a pizza every 45 seconds. A pizza can be customized, baked, and topped in less than five minutes by the robotic machine. Stellar Pizza will be in operation in the spring of 2022 in Los Angeles. The pizza–making robot will fit into the back of a truck. View this video (3:36 minutes) that shows the Stellar Pizza robotic machine in action.
Questions
1. Would Stellar capitalize or expense the cost of the robotic pizza–making machine?
2. Would Stellar capitalize or expense the cost of the truck to house the robotic pizza–making machine?
3. Would Stellar capitalize or expense the cost of the ingredients used to top the pizzas (i.e., pepperoni, mushrooms, onions, and cheese)?
4. If Stellar needs to replace the controller cables after the robotic machine is used for 2,000 hours, is the cost of those controller cables capitalized or expensed by Stellar? Why does it matter?
5. What is the impact of capitalizing an item on the balance sheet? On the income statement?
6. What is the impact of expensing an item on the balance sheet? On the income statement?
