Demmert Manufacturing incurred the following expenditures during the current fiscal year: annual maintenance on its equipment, $5,400; remodeling of offices, $22,000; rearrangement of the shipping and receiving area resulting in an increase in productivity, $35,000; addition of a security system to the manufacturing facility, $25,000. How should Demmert account for each of these expenditures

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03-05-2021
Business

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Demmert Manufacturing incurred the following expenditures during the current fiscal year: annual maintenance on its equipment, $5,400; remodeling of offices, $22,000; rearrangement of the shipping and receiving area resulting in an increase in productivity, $35,000; addition of a security system to the manufacturing facility, $25,000. How should Demmert account for each of these expenditures

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Aquialaskaidn Aquialaskaidn · Answer 1 · 2021-05-03T14:58:18-04:00

Answer:

Annual maintenance on its equipment = Expensed

Remodelling of offices = Capitalised and depreciated.

Rearrangement of the shipping and receiving area = Capitalised and depreciated.

Addition of a security system = Capitalised and depreciated.

Explanation:

Annual maintenance on its equipment = $5,400 ( This is a normal maintenance bill and can be entirely expensed in the year it occurs.)

Remodelling of offices = $22,000 ( This is a part of the transformation process and should be capitalised and depreciated accordingly.)

Rearrangement of the shipping and receiving area = $35,000 (Since this is a reorganisation that would increase efficiency, it should be capitalised and depreciated.)

Addition of a security system = $25,000 ( Since this is an addition of asset, it should be capitalised and depreciated.)

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