How should equipment be classified for accountability and capitalization purposes?

• A. Equipment is intangible assets.
• B. Equipment must be disposed after grant ends.
• C. Equipment is tangible, nonexpendable property with a unit cost above a set capitalization threshold; must be tracked by serial numbers, location, and condition.
• D. Equipment is any item that can be purchased with grant funds.

Answer: (C)

Equipment classification for accountability and capitalization hinges on recognizing that equipment is tangible personal property that is nonexpendable and has a cost above the organization’s capitalization threshold. Because it’s nonexpendable, it stays in use and must be tracked over time, typically by assigning a serial number, recording its location, and noting its condition. This level of tracking supports accurate asset records, audits, depreciation calculations, and proper grant compliance. Intangible assets aren’t equipment, since they lack physical form. The idea that equipment must be disposed of after a grant ends isn’t a defining criterion—disposition depends on policy and grant rules. And simply being purchasable with grant funds is too broad; capitalization requires meeting the cost threshold and maintaining formal asset records and controls.