Question

Hanoi Foods incurs the following expenditures during the current fiscal year: (1) annual maintenance on its machinery, $8,900; (2) remodeling of offices, $42,000; (3) improvement of the shipping and receiving area, resulting in an increase in productivity, $25,000; and (4) addition of a security system to the manufacturing facility, $35,000. How should Hanoi account for each of these expenditures?

Answer 1

Answer:

The $8,900 spent in machinery maintenance should be accounted as current period expenses.

The $42,000 spent in office remodelations should capitalize the buildings asset.

The $25,000 spent in improving the shipping and receiving area should capitalize the manufacturing facility.

The $35,000 spent in a new security system should capitalize the manufacturing facility.