Several years ago, Health Services acquired a helicopter for use in emergency situations. Health Services incurred the following expenditures related to the helicopter delivery operations in the current year:1. Overhauled the engine at a cost of $7,500. Health Services estimated the work would increase the service life for an additional five years.2. Cleaned, repacked, and sealed the bearings on the helicopter at a cost of $800. This repair is performed annually.3. Added new emergency health equipment to the helicopter for $25,000.4. Modified the helicopter to reduce cabin noise by installing new sound barrier technology at a cost of $15,000.5. Paid insurance on the helicopter for the current year, which increased 15% over the prior year to $9,000.6. Performed annual maintenance and repairs at a cost of $39,000.Required:Indicate whether Health Services should capitalize or expense each of these expenditures. How could Health Services use expenditures like these to increase reported earnings?
Several years ago, Health Services acquired a helicopter for use in emergency situations. Health Services incurred the following expenditures related to the helicopter delivery operations in the current year:
1. Overhauled the engine at a cost of $7,500. Health Services estimated the work would increase the service life for an additional five years.
2. Cleaned, repacked, and sealed the bearings on the helicopter at a cost of $800. This repair is performed annually.
3. Added new emergency health equipment to the helicopter for $25,000.
4. Modified the helicopter to reduce cabin noise by installing new sound barrier technology at a cost of $15,000.
5. Paid insurance on the helicopter for the current year, which increased 15% over the prior year to $9,000.
6. Performed annual maintenance and repairs at a cost of $39,000.
Required:
Indicate whether Health Services should capitalize or expense each of these expenditures. How could Health Services use expenditures like these to increase reported earnings?
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 3 images
