Question

A company purchased a building on Jan 1, 2021, for $261,000. In addition, during 2021 the following costs related to the building have been incurred: Utilities$23,000 Property tax 5,100 Expansion of the building 64,000 New air-conditioning system 39,000 General maintenance$30,000 The amount of expenditures to capitalize for the year (not including the initial purchase of the building) is:

Answer 1

Answer: $103,000

Step-by-step explanation:

Generally, capitalized expenses are those expenses that will contribute to the long term improvement of the assets. Short term expenses are expensed.

In the question given, the Expansion of the building and the new air-conditioning system will be capitalized as they add a long term benefit.

Property taxes will be expenses as well as utilities and general maintenance as they are period costs.

Calculating the Capitalized cost is then,

= 64,000 + 39,000

= $103,000

The amount of expenditures to capitalize for the year (not including the initial purchase of the building) is $103,000.