Dove Company charged various expenditures made during 2018 to an account called "Repairs and Maintenance Expense."...

Dove Company charged various expenditures made during 2018 to an account called "Repairs and Maintenance Expense." You have been asked by the internal audit committee to review each expenditure to determine whether (or not) each should be included in the Repairs and Maintenance Expense account. Here are the items currently included in the R & M Expense account: 1. Yearly engine tune-up and oil change for the company's 6 delivery trucks, $660. 2. Rearrangement of the machinery on the main production line, $10,000. (This type of rearrangement is done every four years.) 3. Installation of new aluminum siding on the manufacturing plant, $52,000. (This siding replaces wood siding and is expected to last 20 years.) 4. Purchase of two new forklifts to be used in the storeroom and loading dock, $13,500. (Each has a useful life of 10 years.) 5. Repairs on the air conditioning system, $3,450 that will not last more than the current year. (Dove plans to put in a new system in early 2019.) Required: a. For each of the expenditures listed above, indicate whether the expenditure is properly charged to the repair and maintenance account. If so, write "Properly charged to R & M Expense" next to the item number. If not, indicate where the item should be charged and why. b. Cite all textbook (and other) sources you used in making your decision. You should have a source listed for each of the five items, including page numbers.

Expert Solution

I cannot give you the textbook page numbers because i do not have one , but i can help with the answers , comment for any query

1.Engine tune-up and oil change on the company’s 6 delivery trucks—$660.
•Regular routine expense, therefore correctly charged to repairs and maintenance expense.

2.Rearrangement of machinery on the main production line—$10,000 (done very 4 years)
•Since the rearrangement of machinery will not increase the operational efficiency, hence the expenditure on rearrangement cannot be capitalized. Therefore, this has been correctly charged to repair and maintenance expense.

3.Installation of aluminum siding on the manufacturing plant—$52,000.
•Installation of aluminum siding should not be charged to repair and maintenance expense because it will be capitalized (added to the cost on the asset side of the balance sheet).

4.Purchase of new forklift to move finished product to the loading dock—$13,500.
•Purchase of new forklift will not be charged to repair and maintenance expense assuming that the benefit of a new forklift will extend to business in the long-run (10 years). Therefore, the efficiency of business is improved because of the purchase and it will be capitalized.

5.Repairs on the air conditioning system, $3,450 that will not last more than the current year. (Dove plans to put in a new system in early 2019.) - this is properly charged to repair and maintenance , since this is less than a current year so it is not a major repair expense

ekkarill92 answered 4 months ago

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