Question Details

(Solved) (Latest ver. Aug 2020) - Overhaul Expenditures for Redline Publishers

Brief item decscription

Item details:


Redline Publishers, Inc. produces various manuals ranging from computer software instructional booklets to manuals explaining the installation and use of large pieces of industrial equipment. At the end of 2013, the company's balance sheet reported total assets of $62 million and total liabilities of $40 million. The income statement for 2013 reported net income of $1.1 million, which represents an approximate 3% increase from the prior year. The company's effective income tax rate is 30%.

Near the end of 2013, a variety of expenditures were made to overhaul the company's manufacturing equipment. None of these expenditures exceeded $750, the materiality threshold the company has set for the capitalization of any such expenditure. Even though the overhauls extended the service life of the equipment, the expenditures were expensed, not capitalized.

John Henderson, the company's controller, is worried about the treatment of the overhaul expenditures. Even though no individual expenditure exceeded teh $750 materiality threshold, total expenditures were $70,000.

Should the overhaul expenditures be capitalized or expensed? Why?


About this question:

This question was answered on: Sep 16, 2020

PRICE: $11.5 (18.37 KB)

Buy this answer for only: $11.5

Pay using PayPal (No PayPal account Required) or your credit card. All your purchases are securely protected by PayPal.

Need a similar solution fast, written anew from scratch? Place your own custom order

We have top-notch tutors who can help you with your essay at a reasonable cost and then you can simply use that essay as a template to build your own arguments. This we believe is a better way of understanding a problem and makes use of the efficiency of time of the student. New solution orders are original solutions and precise to your writing instruction requirements. Place a New Order using the button below.

Order Now