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    ladytee1010's Avatar
    ladytee1010 Posts: 1, Reputation: 1
    New Member
     
    #1

    Mar 29, 2009, 05:43 PM
    Item Classification
    Paradise Isle Ltd spent $229 500 in 2009 on a resort built on a small offshore island twelve years ago. Expenditure consisted of,-

    (I) Painting of old bures $20 000
    (ii) Replacing the wooden window frames on the old bures with
    aluminium frames 30 000
    (iii) Purchase of new matting for the bedroom floors of the old bures 15 000
    (iv) Purchase of new bedding for one bure whose occupant had
    accidentally set the bedclothes on fire 500
    (v) Demolition of two old sheds to make space for new bures 4 000
    (vi) Construction of new bures 100 000
    (vii) Painting of new bures 20 000
    (viii) Wages paid to own employees while assisting in building
    operations 30 000
    (ix) Damages paid to a guest in one of the old bures who suffered
    injuries from a flying tile 10 000

    Required

    (a) For each item state whether, at the end of 20X9, it is an
    asset or an expense. Explain the rules governing your decision and how the rules apply in the particular case. (You may group items to which identical rules apply.)

    (b) Would any of your answers to (a) have been different if the resort had been purchased by Paradise Isle Ltd just prior to the expenditure?
    ROLCAM's Avatar
    ROLCAM Posts: 1,420, Reputation: 23
    Ultra Member
     
    #2

    Mar 29, 2009, 07:30 PM

    E = EXPENSE A = ASSET

    (I) Painting of old bures $20 000*****E
    (ii) Replacing the wooden window frames on the old bures with
    aluminium frames 30 000*****E
    (iii) Purchase of new matting for the bedroom floors of the old bures 15 000*****A
    (iv) Purchase of new bedding for one bure whose occupant had
    accidentally set the bedclothes on fire 500*****E
    (v) Demolition of two old sheds to make space for new bures 4 000*****E
    (vi) Construction of new bures 100 000*****A
    (vii) Painting of new bures 20 000*****A
    (viii) Wages paid to own employees while assisting in building
    operations 30 000*****A
    (ix) Damages paid to a guest in one of the old bures who suffered
    injuries from a flying tile 10 000*****E

    ______________________________________

    B) YES, All the expenditures could have been CAPITALISED.

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