Solution-Dispose of it, inc. produces a variety of paper

Dispose of it, inc. produces a variety of paper products

Reference no: EM13668373

Dispose of It, Inc. produces a variety of paper products. At the end of 2014, the company's balance sheet reported total assets of $124 million and total liabilities of $80 million. The income statement for 2014 reported net income of $2.2 million, which represents an approximate 3% increase from the prior year.
The company's effective income tax rate is 32%.
Near the end of 2014, a variety of expenditures were made to overhaul the manufacturing equipment. .Even though the overhauls extended the service life of the equipment, they were expensed, not capitalized. None of these expenditures exceeded $800, the materiality threshold the company has set for the capitalization of such expenditure Joan Jett, the company's controller, is worried about the treatment of the overhaul expenditures. Even though no individual expenditure exceeded the $800 materiality threshold, total expenditures were $140,000.
Required:
Refer to SEC Staff Accounting Bulletin No. 99 - Materiality
(https://www.sec.gov/interps/account/sab99.htm ) for guidance in answering the following question:
Should the overhaul expenditures be capitalized or expensed?

Reference no: EM13668373

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Dispose of it, inc. produces a variety of paper products

Reference no: EM13668373

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