Improvements versus repairs or maintenance. The balance sheet of May Department Stores includes a building with an acquisition cost of $\$ 800,000$ and accumulated depreciation of $\$ 660,000$. The firm depreciates the building on a straight-line basis over 40 years. The remaining service life of the building and its depreciable life are both seven years. On January 2 of the current year, the firm makes an expenditure of $\$ 28,000$ on the entrance ramps and stairs of the store. Indicate the accounting for the current year if May Department Stores made the expenditure of $\$ 28,000$ under each of the following circumstances. Consider each of these cases independently, except where noted. Ignore income tax effects.

a. Management decided that improved entrances would make the store more attractive and that new customers would come. The ramps and stairs are a worthwhile investment.

b. A flood on New Year's Day ruined the entrance ramps and stairs previously installed. The firm carried no insurance coverage for this sort of destruction. The new ramps and stairs are physically identical to the old ones. The old ones had a book value of $\$ 28,000$ at the time of the flood.

c. Vandals destroyed the ramps and stairs on New Year's Eve. May carried no insurance for this sort of destruction. The ramps and stairs installed are physically identical to the old ones, which had a book value of $\$ 28,000$ at the time of the destruction.

d. The old entrances were not handicapped-accessible. Management had previously considered replacing its old entrances with new, handicapped-accessible ones but had decided that there was zero benefit to the firm in doing so. It installed new entrance ramps and stairs because a new law required that all stores have such ramps and stairs on the street level. The alternative to installing the new ramps was to shut down the store. In responding to this part, assume zero benefits result from the new ramps. Part $\mathbf{e}$ considers the more realistic case of some benefits.

e. Management had previously considered replacing its old entrances with new ones but had decided that the handicapped-accessible ramps and stairs were worth only $\$ 7,000$ (that is, would produce future benefits of only $\$ 7,000$ ) and so were not a worthwhile investment. The new law (see part d), however, now requires the store to do so (or else shut down), and management installs the new entrance facilities.