Ch. 11 Test 10.00 points Brief Exercise 11-16 Subsequent expenditures [L011-9 De
ID: 2598772 • Letter: C
Question
Ch. 11 Test 10.00 points Brief Exercise 11-16 Subsequent expenditures [L011-9 Demmert Manufacturing incurred the following expenditures during the current fiscal year. annual maintenance on its machinery, $5,600, remodeling of offices, $22,200; rearrangement of the shipping and receiving area resulting in an increase in productivity $35,200, addition of a security system to the manufacturing facility, $25,200 How should Demmert account for each of these expenditures? Expenditure Annual maintenance on machinery Remodeling of offices Rearrangement of the shipping and receiving area Addtion of a secunty system Worksheet Lou-s TOSHIBA esc 2 3 4 5 tabExplanation / Answer
The expenditures should be accounted for in the following manner:
Expenditures that enhance the productivity or life of an asset or expenditures to add new assets that can be used for more than one year should be classified as capital expenditures. In the given case, except annual maintenance of the machinery, all three expenditures either enhance the productivity of the asset or are new additions.
Expenditure Amount Classification Annual maintenance on machinery 5600 Revenue expenditure Remodeling of offices 22200 Capital expenditure Rearrangement of the shipping and receiving area 35200 Capital expenditure Addition to a security system 25200 Capital expenditure