Case 1-6.pdf Case 1-6 Capitalization versus Expensing Gloria Hernandez is the controller of a public company. She require expensing of each individual item; not capitaliza- just completed a meeting with her superior, John Harrison, tion. However, she is under a great deal of pressure to go who is the CFO of the company. Harrison tried to convince along with capitalization to meet financial analysts' earnings Hernandez to go along with his proposal to combine 12 expectations and provide for a bonus to top management expenditures for repair and maintenance of a plant asset including herself. Her job may be at stake, and she doesn't into one amount (S1 million). Each of the expenditures is want to disappoint her boss. less than $100,000, the cutoff point for capitalizing expen- ditures as an asset and depreciating it over the useful life. Questions Hernandez asked for time to think about the matter. As the controller and chief accounting officer of the company, 1. What would motivate you to speak up and act or to stay Hemandez knows it's her responsibility to decide how to record the expenditures. She knows that the $1 million . Assume that you were in Gloria Hejaandez's position. amount is material to eanings and the rules in accounting What would you do and why? silent