Final answer:
Major structural improvements to a clubhouse should typically be capitalized, not expensed, as they extend the asset's useful life and offer future economic benefits. These costs are then depreciated over the improvement's useful life in accordance with GAAP.
Step-by-step explanation:
When considering whether to expense or capitalize major structural improvements to a clubhouse, it is important to understand the concepts of capital expenditures and operating expenses. Capitalizing an improvement means adding its cost to the value of the asset; this cost is then depreciated over the improvement's useful life. On the other hand, expensing a cost means it is recognized as an expense immediately and fully deducted in the current accounting period.
Major structural improvements to a clubhouse, due to their nature, are typically capitalized. This is because they likely extend the asset's useful life, increase its value, or adapt it for a new use. Generally Accepted Accounting Principles (GAAP) recommend capitalizing costs that provide future economic benefits. Capitalized improvements are then systematically depreciated over their useful life, aligning the expense recognition with the period in which the economic benefits are received.