Question

2. In 2013, Corky St. Clair, an “off-off-off-off” Broadway producer/director moves back to Blaine Missouri and purchases an old movie theater in hopes of reviving the facility for future community theater productions. The purchase price of the property was $150,000. He paid $15,050 to replace the roof, paid $7,643 for wiring and plumbing to meet the city code, and hired local teenagers to sweep and clean the building totaling $320. Additional costs include: $13,000 to remodel backstage offices; $1,200 for advertising opening night; and $3,000 for the post-show party. What is the cost of building?

Answer 1

All the capital expenditure will be added to the purchase price of the building to calculate the cost of building.

Cost of building=Purchase price of property+ expenditure to replace roof+ wiring and plumbing expenses+ sweeping and cleaning expenses+cost to remodel backstage office=$150,000+$15,050+$7,643+$320+$13,000=$186,013

Advertising opening night and post show party are revenue expenses. Capital expenditure are those expenditure which are incurred one time at the time of acquisition of a fixed asset. Revenue expenses are incurred annually.