Question

During the year just ended, Fox company made the following expenditures relating to plant machinery and equiptment: Renovation of a group of machines at a cost of $50,000 to secure greater efficiency in production over their remaining 5-year useful lives. The project was completed on December 31. Continuing, frequent, and low-cost repairs at a cost of $35,000. A broken gear on a machine was replaced at a cost of $5,000.

What total amount should be charged to repairs and maintenance?

Answer 1

Renovation of a group of machines at a cost of $50,000 to secure greater efficiency in production over their remaining 5-year useful lives.

Should be Capitalized as it increases the efficiency

Continuing, frequent, and low-cost repairs at a cost of $35,000

charged to repairs and maintenance

broken gear on a machine was replaced at a cost of $5,000.

charged to repairs and maintenance

Hence, $40,000 Should be charged to repairs and maintenance

If any expense incurrced increases the benifits from previously assessed standard then it should be capitalized. Else ot should be expensed off