Question

Expenditure	Amount	Classification
Annual maintenance on machinery
Remodeling of offices
Rearrangement of the shipping and receiving area
Addition of a security system

Demmert Manufacturing incurred the following expenditures during the current fiscal year: annual maintenance on its machinery, $6,800; remodeling of offices, $23,400; rearrangement of the shipping and receiving area resulting in an increase in productivity, $36,400; addition of a security system to the manufacturing facility, $26,400. How should Demmert account for each of these expenditures?

Answer 1

Expenditure	Amount	Classification
Annual maintenance on machinery	6800	This is normal repair expense and hence should be expensed off fully in the year incurred
Remodeling of offices	23400	This is part of improvement and hence should be capitalized and depreciated.
Rearrangement of the shipping and receiving area	36400	This is rearragnement increasing productivity, hence should be capitalized and depreciated
Addition of a security system	26400	This is addition of assets and should be captilized and depreciated