Question

Betterment versus Maintenance Expenditures

During the year, Graham International made the following expenditures relating to plant, machinery, and equipment:

• Completed regularly scheduled repairs at a cost of $350,000.
• Overhauled several stamping machines at a cost of $600,000 to improve production efficiency.
• Replaced a broken cooling pump on a 100-ton press at a cost of $35,000.

Required

Identify which expenditures should be expensed as a maintenance expense or capitalized as a betterment outlay.

Amount charged as maintence expense for the year: $Answer

Amount charged as betterment outlays for the year: $Answer

Answer 1

Maintenance expense (regular repair cost+ Replacement )	385, 000
Betterment outlays (overhaul 600,000)	600,000