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- During the current year, Arkells Inc. made the following expenditures relating to plant machinery. Renovated five machines for $100,000 to improve efficiency in production of their remaining useful life of five years Low-cost repairs throughout the year totaled $70,000 Replaced a broken gear on a machine for $10,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?King Company made the following expenditures: Continuing and frequent repairs Repainted the plant building 400,000 100,000 300,000 140,000 Major improvements to the electrical wiring system Partial replacement of roof tiles What amount should be charged to repair and maintenance expense? a. 960,000 b. 820,000 c. 640,000 d. 540,000Betterment versus Maintenance Expenditures During the year, Graham International made the following expenditures relating to plant, machinery, and equipment: Completed regularly scheduled repairs at a cost of $300,000. Overhauled several stamping machines at a cost of $550,000 to improve production efficiency. Replaced a broken cooling pump on a 100-ton press at a cost of $30,000. Required Identify which expenditures should be expensed as a maintenance expense or capitalized as a betterment outlay. Total amount charged as maintenance expense for the year: $Answer Total amount charged as betterment outlays for the year: $Answer
- During the current year, Arkells Inc. made the following expenditures relating to plant machinery. • Renovated seven machines for $250,000 to improve efficiency in production of their remaining useful life of eight years • Low-cost repairs throughout the year totaled $79,000 • Replaced a broken gear on a machine for $6,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?. On November 15, 2021, Trade Company made payments for the following expenditures: Replacement parts for overhaul of machine 550,000 Labor and overhead in connection with overhaul 140,000 Continuing, frequent and low cost repairs 150,000 Replacement of broken gear of machine 50,000 1. The overhaul resulted in a significant increase in production. 2. the journal entry to record the expenditure to be capitalized would beA company purchased a special purpose machine on August 1st of the previous year. It was installed and ready to run on January 1st of the current year. The following costs were incurred in the purchase and installation of the machine: Invoice price $1,200,000 Freight costs 6,000 Installation costs 64,000 Electrical and power connections 32,000 Repairs to correct damage during uncrating 12,000 Costs to adjust machine to appropriate specifications 56,000 Costs of spare parts for future use 108,000 Sales tax 70,500 Cost of…
- During the fiscal year, ABC Company incurred the following costs related to property, plant and equipment: Amount paid to the contractor for the building constructed 12,000,000Building permit fee 120,000Excavation cost 110,000Architect fee 440,000Interest that would have been earned had the money used during theperiod of construction been invested in the money market 330,000Invoice cost of machine acquired, terms 8/10, n/30 6,500,000Freight, unloading and delivery charges for machine acquired 100,000Custom duties and other charges 270,000Allowance and hotel accommodation, paid to foreign techniciansduring installation and test run of machine 520,000Royalty payment on machines purchased (based on units producedand sold) 240,000Cash paid for the purchase of land (none was allocated to oldbuilding) 10,000,000Mortgage assumed on the land purchased 2,000,000Realtor’s commission 650,000Legal fees, realty taxes and documentation expenses 900,000Amount paid to relocate persons squatting on the…During the year ended 31 December 20X1, Bougs Co built an extension to its head office. Associated costs are as follows: Land acquisition Fees for environmental certifications and building permits Sm 20 X3 X4 Architect and engineer fees Construction material and labour costs X5 At 30 September 20X1, this head office extension became available for use. At that date, the total borrowing costs incurred on a loan which was used specifically to finance this head office extension amounted to $1.6 million. Since construction costs are gradually eliminated according to the construction progress, there is a temporary income from the above loan of $0.3 million during the construction period.Maxtor Technology incurred the following costs during the year related to the creation of a new type of personal computer monitor: Salaries $220,000 Depreciation on R&D facilities and equipment Utilities and other direct costs incurred for the R&D facilities Patent filing and related legal costs Payment to another company for performing a portion of the development work Costs of adapting the new monitor for the specific needs of a 125,000 66,000 22,000 120,000 80,000 customer What amount should Maxtor report as research and development expense in its income statement?
- Which of the following costs relating to non-current assets should not be capitalized? replacement of a building’s roof every 15 years cost of site preparation installation and assembly costs replacement of small spare parts annuallyA manufacturing company receives an invoice on 29 February 20X2 for work done on one of its machines. $25,500 of the cost is actually for a machine upgrade, which will improve efficiency. The accounts department do not notice and charge the whole amount to maintenance costs. Machinery is depreciated at 25% per annum on a straight-line basis, with a proportional charge in the years of acquisition and disposal. By what amount will the profit for the year to 30 June 20X2 be understated?On November 15, 2021, Trade Company made payments for the following expenditures: Replacement parts for overhaul of machine 550,000 Labor and overhead in connection with overhaul 140,000 Continuing, frequent and low cost repairs 150,000 Replacement of broken gear of machine 50,000 The overhaul resulted in a significant increase in production. Prepare the journal entry to record the expenditure to be capitalized: