Assume a (hypothetical) company, Troff erini S. A., incurred the following expendituresto purchase a towel and tissue roll machine: €10,900 purchase price including taxes,€200 for delivery of the machine, €300 for installation and testing of the machine,and €100 to train staff on maintaining the machine. In addition, the company paid aconstruction team €350 to reinforce the factory floor and ceiling joists to accommodatethe machine’s weight. Th e company also paid €1,500 to repair the factory roof (a repairexpected to extend the useful life of the factory by five years) and €1,000 to have theexterior of the factory and adjoining offices repainted for maintenance reasons. Th erepainting neither extends the life of factory and offices nor improves their usability.1. Which of these expenditures will be capitalized and which will be expensed?2. How will the treatment of these expenditures aff ect the company’s financialstatements?
Assume a (hypothetical) company, Troff erini S. A., incurred the following expenditures
to purchase a towel and tissue roll machine: €10,900 purchase price including taxes,
€200 for delivery of the machine, €300 for installation and testing of the machine,
and €100 to train staff on maintaining the machine. In addition, the company paid a
construction team €350 to reinforce the factory floor and ceiling joists to accommodate
the machine’s weight. Th e company also paid €1,500 to repair the factory roof (a repair
expected to extend the useful life of the factory by five years) and €1,000 to have the
exterior of the factory and adjoining offices repainted for maintenance reasons. Th e
repainting neither extends the life of factory and offices nor improves their usability.
1. Which of these expenditures will be capitalized and which will be expensed?
2. How will the treatment of these expenditures aff ect the company’s financial
statements?
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