Question
Ethics #1 : Capitalize or Expense Furniture.com uses automated equipment. Early in the year, Furniture.com purchased equipment at a cost of $400,000. Management expects the
Ethics #1 : Capitalize or Expense
Furniture.com uses automated equipment. Early in the year, Furniture.com purchased equipment at a cost of $400,000. Management expects the equipment to remain in service for 5 years, with zero residual value. Furniture.com plans on using straight-line depreciation. Mason Green is finalizing the depreciation expense calculation for the year when Furniture.com's controller, Flynn Steel, tells Mason to expense the entire cost of the equipment instead of capitalizing the equipment at the time of purchase. Flynn argues that the company won't have to worry about recording depreciation for the next 5 years - The accounting will be "just easier". What should Mason do? What would you do?
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