When should renovation and repair costs be capitalized versus expensed?
When should renovation and repair costs be capitalized versus expensed?
Homework Answers
Repairs
Repairs are the restoration of a capital asset to its full productive capacity without an increase in its previously estimated service life or productive capacity.
Capitalization Guidelines: Repairs costing $75,000 or less should not be capitalized. Repairs in excess of $75,000 should not be capitalized unless it can be shown that it extends the useful life of the asset or significantly changes the functionality of the asset in which the quantity or quality of the asset’s output is enhanced.
Renovation, Remodeling, Additions and Improvements
These categories may be considered as betterment which are expenditures having the effect of extending the useful life of an existing fixed asset.
Capitalization Guidelines: Expenditures in this category costing $75,000 or less should not be capitalized. Expenditures in excess of $75,000 should be capitalized unless it can be shown it does not extend the useful life of the asset.
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When should renovation and repair costs be capitalized versus
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