KenCo bought a new packaging machine on September 15.By October 1,the machine had been installed,all the employees had been trained to use it,and it was in full operational use.The factory manager told the accountant: "I know the machine is running the way we hoped it would.But I want you to capitalize all of the machine's operating expenses through our December 31 yearend."
Required:
1.What would be the effect on the company's income statement and balance sheet for the current year if three months of operating expenses are capitalized? Why would the company manager want to do this?
2.Is it ethical to capitalize costs that should be expensed?

Question

Quizplus · Accepted Answer

The Answer of KenCo bought a new packaging machine on September 15.By October 1,the machine had been installed,all the employees had been trained to use it,and it was in full operational use.The factory manager told the accountant: "I know the machine is running the way we hoped it would.But I want you to capitalize all of the machine's operating expenses through our December 31 yearend."
Required:
1.What would be the effect on the company's income statement and balance sheet for the current year if three months of operating expenses are capitalized? Why would the company manager want to do this?
2.Is it ethical to capitalize costs that should be expensed?

KenCo Bought a New Packaging Machine on September 15