Demmert Manufacturing incurred the following expenditures during the current fis

Question

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?

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

Explanation / Answer

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

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