Question

Sheridan Reclaimers entered into a contract with Skysong Demolition to manage the processing of recycled materials on Skysong various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Sheridan incurs selling commission costs of $2,160 to obtain the contract. Before performing the services, Sheridan also designs and builds receptacles and loading equipment that interfaces with Skysong demolition equipment at a cost of $25,770. These receptacles and equipment are retained by Sheridan and can be used for other projects. Skysong promises to pay a fixed fee of $10,900 per year, payable every 6 months for the services under the contract. Sheridan incurs the following costs: design services for the receptacles to interface with Skysong equipment $3,300, loading equipment controllers $6,460, and special testing and OSHA inspection fees $2,160 (some of Skysong projects are on government property).

(a)

Determine the costs that should be capitalized as part of Sheridan Reclaimers revenue arrangement with Skysong Demolition. (If answer is 0, please enter 0. Do not leave any fields blank.)

Commission Costs		$
Design Services		$
Cost of loading Equipment Controllers		$
Inspection Fees		$
Receptacles and loading Equipment		$

Answer 1

Answer:-

Sr. No.	Particulars	Amount	Explanation
1	Commission Costs	2,160.00	Cost incurred to obtain the contract are capitalized
2	Design Services	3,300.00	Costs incurred to design an equipment for use in demolition process are to be capitalized.
3	Cost of loading Equipment Controllers	6,460.00	Loading costs incurred for an equipment for use in demolition process are to be capitalized.
4	Inspection fees	2,160.00	Inspection fees incurred before obtaining the contract are to be capitalized
5	Receptacles and loading Equipment	25,770.00	Original cost of equipment to be used for demolition are to be capitalized.
	Cost to be Capitalized	39,850.00