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Nezavi [6.7K]
3 years ago
5

Kitchen Supply Corporation obtained land, a factory, and manufacturing equipment in a lump-sum purchase for $990,000. An apprais

al set the value of the land at $592,800, the factory at $421,800, and the equipment at $125,400. Immediately after the purchase, the factory was renovated at a cost of $50,000. At what amount should Kitchen Supply record the factory?
Business
1 answer:
Papessa [141]3 years ago
6 0

The amount at which Kitchen Supply Corporation should initially record the Factory immediately after the purchase is <u>$421,80</u><u>0</u>.

However, the Renovation Cost of $50,000 should increase the amount of the Factory to <u>$471,800</u> ($421,800 + $50,000) immediately after the renovation.

<h3>Why is renovation cost capitalized?</h3>

The cost of renovation is usually capitalized because the cost needs to be recorded as an asset on the balance sheet, instead of an expense in the income statement.

Thus, the final amount the Factory should be recorded after the renovation is <u>$471,800</u>.

Learn more about asset capitalization at brainly.com/question/25999205

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