Calculating Repair and Maintenance Expense The Camelback Cement Company made the following expenditures relating to its...

Calculating Repair and Maintenance Expense

The Camelback Cement Company made the following expenditures relating to its plant and equipment:

Overhauled several machines at an aggregate cost of $175,000 to improve the efficiency of the equipment over its remaining useful life.

Replaced a broken driveshaft on a forklift at a cost of $30,000.

Completed regularly scheduled repairs at a cost of $75,000.

Installed a foam roof on the plant over the existing, but leaking, flat-rolled roof at a cost of $200,000.

Solutions

Expert Solution

Repair and Maintainence Expense:

1. $0, Because any cost incurred which increases the efficiency of a equipment over its useful life over its normal capacity, shall be termed as Capital Cost and to be added as a Part of cost and will be depreciated over the balance remaining useful life of asset.

2. $30,000, Because replacing a defective component of an asset definitely increases efficiency compared with defective product, but does not increases its effeciency over its general capacity.Hence any such cost incurred to replace a broken item shall be Revenue expense hence to be included in Repairs and Maintainence Expense.

3. $75,000, Because Regular repairs are done to prevent the assets from breakdown and assets works at its full capacity but these does not enhance their capacity. Hence they are Revenue Expense in nature therefore shall be included in Repairs and Maintainence Expense.

4. $200,000, Because any expenditure incurred by assesee in respect of repairing the asset, whether be repairing cost incurred or use of any substitute choice to repair such defect like Installing a foam roof over existing to remove leakage (defect), shall be allowed as expenditure hence they shall be covered in Repairs and Maintainence Expense.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

The following expenditures relating to plant assets were made by Prather Company during the first 2 months of 2017.

The following expenditures relating to plant assets were made by Prather Company during the first 2 months of 2017. 1. Paid $5,000 of accrued taxes at time plant site was acquired. 2. Paid $200 insurance to cover possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on new delivery truck. 4. Paid $17,500 for parking lots and driveways on new plant site. 5. Paid $250 to have company name and advertising...

A company made the following expenditures in connection with the construction of its new building: Architect’s...

A company made the following expenditures in connection with the construction of its new building: Architect’s fees for the new building $25,000 Cash paid for land and run-down building on the land 425,000 Removal of old building 17,500 Salvage from sale of old building materials 6,000 Construction survey to site the new building 3,500 Legal fees for title search 4,500 Excavation for basement construction 45,500 Machinery purchased for operations 250,000 Storage charges on machinery because building was not ready when...

Belltone Company made the following expenditures related to its 10-year-old manufacturing facility:

Belltone Company made the following expenditures related to its 10-year-old manufacturing facility: 1. The heating system was replaced at a cost of $250,000. The cost of the old system was not known. The company accounts for improvements as reductions of accumulated depreciation. 2. A new wing was added at a cost of $750,000. The new wing substantially increases the productive capacity of the plant. 3. Annual building maintenance was performed at a cost of $14,000. 4. All of the equipment on the...

There are two parts to this problem a) & b) A company made the following expenditures...

There are two parts to this problem a) & b) A company made the following expenditures in connection with the construction of a new building: Architect’s fees $12,000 Cash paid for land and unusable building on the land 300,000 Removal of old building 18,000 Salvage from sale of old building materials -4,000 Construction survey 1,500 Legal fees for title search 3,000 Excavation for basement construction 25,000 Machinery purchased for operations 100,000 Freight on machinery purchased 1,600 Construction costs of new...

A manufacturing company employs a maintenance crew to repair its machines as needed. Management now wants...

A manufacturing company employs a maintenance crew to repair its machines as needed. Management now wants a simulation study done to analyse what the size of the crew should be, where the crew sizes are 2, 3, and 4. The time required by the crew to repair a machine has a uniform distribution over the interval from 0 and twice the mean, where the mean depends on the crew size. The mean is 4 hours with two crew members, 3...

The Signage Company specializes in the maintenance and repair of signs, such as billboards. On March...

The Signage Company specializes in the maintenance and repair of signs, such as billboards. On March 31, 2016 the accountant for The Signage Company prepared an unadjusted trial balance and an adjusted trial balance. The Signage Company UNADJUSTED TRIAL BALANCE March 31, 2016 ACCOUNT TITLE DEBIT CREDIT 1 Cash 4,750.00 2 Accounts Receivable 17,400.00 3 Supplies 6,200.00 4 Prepaid Insurance 9,000.00 5 Land 100,000.00 6 Buildings 170,000.00 7 Accumulated Depreciation-Buildings 51,500.00 8 Trucks 75,000.00 9 Accumulated Depreciation-Trucks 12,000.00 10 Accounts...

The following information on maintenance and repair costs and revenues for the last two years is...

The following information on maintenance and repair costs and revenues for the last two years is available from the accounting records at Arnie’s Arcade & Video Palace. Arnie has asked you to help him understand the relation between business volume and maintenance and repair cost. Month Maintenance and Repair Cost ($000) Revenues ($000) July $2.31 $59.00 August 3.28 53.00 September 2.80 49.00 October 2.21 65.00 November 2.30 77.00 December 1.14 105.00 January 3.12 45.00 February 3.16 51.00 March 3.02 61.00...

The following information on maintenance and repair costs and revenues for the last two years is...

The following information on maintenance and repair costs and revenues for the last two years is available from the accounting records at Arnie’s Arcade & Video Palace. Arnie has asked you to help him understand the relation between business volume and maintenance and repair cost. Month Maintenance and Repair Cost ($000) Revenues ($000) July $1.86 $50.00 August 2.83 44.00 September 2.35 40.00 October 1.76 56.00 November 1.85 68.00 December 0.69 96.00 January 2.67 36.00 February 2.71 42.00 March 2.57 52.00...

The following information on maintenance and repair costs and revenues for the last two years is...

The following information on maintenance and repair costs and revenues for the last two years is available from the accounting records at Arnie’s Arcade & Video Palace. Arnie has asked you to help him understand the relation between business volume and maintenance and repair cost. Month Maintenance and Repair Cost ($000) Revenues ($000) July $1.66 $46.00 August 2.63 40.00 September 2.15 36.00 October 1.56 52.00 November 1.65 64.00 December 0.49 92.00 January 2.47 32.00 February 2.51 38.00 March 2.37 48.00...

The following information on maintenance and repair costs and revenues for the last two years is...

The following information on maintenance and repair costs and revenues for the last two years is available from the accounting records at Arnie’s Arcade & Video Palace. Arnie has asked you to help him understand the relation between business volume and maintenance and repair cost. Month Maintenance and Repair Cost ($000) Revenues ($000) July $2.01 $53.00 August 2.98 47.00 September 2.50 43.00 October 1.91 59.00 November 2.00 71.00 December 0.84 99.00 January 2.82 39.00 February 2.86 45.00 March 2.72 55.00...

Subjects