[student007]

Are these policies by a firm reasonable according to GAAP?

1) 2 managers spent almost all of their time supervising the construction and development of a hotel and training its staff. When the buildling was completed, the building, plus the managers' wages were capitalized as the cost of the building.

I would think this policy is reasonable, assuming that the presence of the managers was necessary to get the building up and running.

2) A firm capitlized its operating expenses as "preopening costs" until the operating cash flow broke even. The balance in the "preopening costs" account was equal to operating expenses less revenue.

I don't think its reasonable because don't operating expenses HAVE to be expensed immediately?

One other thing... under what conditions can advertising costs be capitalized?

[CaptainForest]

I agree with your assessments on the 2 points.

As to your question, “under what conditions can advertising costs be capitalized?”……

One condition is that if the advertising was a required necessary to acquire something.