Question

Question 3 [10 marks]
You are Chief Financial Officer for Alpha Resorts. You are reviewing the following transactions: 1. Adding a new patio deck to the resort’s upscale restaurant, R180, 000 2. Painting the ocean side beach houses, R75, 000 3. Purchasing additional golf carts, R25, 000 4. Rebuilding the engine in the resort’s airport shuttle bus, R10, 000 5. Replacing the old air conditioning unit in the golf shop with a more efficient one, R20, 000 Your accountant has capitalized all of these items and intends to depreciate them over the appropriate asset’s remaining useful life as originally estimated.

Indicate whether you agree or disagree with your accountant’s treatment of each item. In those cases where you disagree, state the proper treatment of that expenditure. Use the following table:

Expenditure	Agree or Disagree?	Proper Treatment, if Disagree
1. Adding a new patio deck to the resort’s ocean side bar, R180,000
2. Painting 10 ocean front beach houses, R75,000
3. Purchasing additional golf carts for the club house, R25,000
4. Rebuilding the engine in the resort’s airport shuttle bus, R10,000
5. Replacing the pro shop’s old air conditioning unit with a more efficient one, R20,000

Answer 1