Peronto’s Inc. is an asphalt contractor located in Kansas City, Mo. Peronto’s Inc. is planning on expanding into the Chicago market is budgeting that the start-up expenditures for the new Chicago facilities will be $25,000. These expenditures will be for the location of a new facility and the incremental expenditures for conducting business in a new territory. The CFO for Peronto’s believes that the $25,000 start upexpenditures should be recognized as an asset because they will benefit the company for many periods in the future. Your role as the staff accountant is to determine the correct recognition for the start up expenditures. Your interpretation of the guidance: The correct recognition of the $25,000 start up expenditures will be: a. as an asset b. as an expense
Peronto’s Inc. is an asphalt contractor located in Kansas City, Mo. Peronto’s Inc. is planning on expanding into the Chicago market is budgeting that the start-up expenditures for the new Chicago facilities will be $25,000. These expenditures will be for the location of a new facility and the incremental expenditures for conducting business in a new territory. The CFO for Peronto’s believes that the $25,000 start upexpenditures should be recognized as an asset because they will benefit the company for many periods in the future. Your role as the staff accountant is to determine the correct recognition for the start up expenditures.
Your interpretation of the guidance: The correct recognition of the $25,000 start up expenditures will be:
a. as an asset
b. as an expense
Step by step
Solved in 3 steps
