Fit Fixtures Incorporated (FFI) is a manufacturer of exercise equipment such as treadmills, stair climbers, and elliptical machines. The company has a December 31 year end and uses ASPE. The accounting staff member who normally looks after the capital asset accounts was on maternity leave for the year, and the company put all transactions in a temporary account called Asset Additions and Disposals. The company policy on calculating depreciation for partial periods of ownership is to take 50% of the normal amount of depreciation in the year of addition or disposal. Due to the staff members maternity leave, no depreciation or amortization expense has yet been taken in 2020.

1.

The company completed construction of a new plant in Saskatchewan on December 15, 2020, to help it better meet the needs of its customers west of Ontario. The costs associated with this construction project were as follows:

Land		$ 390,000
Construction contract: building, 20 years of useful life, residual value of $ 39,000		1,170,000
Equipment		(See below)
Furniture		195,000
Training costs (employees learning to use equipment)		35,100
Avoidable interest calculated at 8% on financing of construction project from inception until put in use		58,500

The equipment purchased for the new plant was bought on a deferred payment contract signed on December 1. FFI issued a $ 8-million, five-year, noninterest-bearing note payable to the equipment supplier at a time when the annual market rate of interest was 5%. The note will be repaid with five equal payments made on December 1 of each year, beginning in 2021.

2.

FFI purchased a used computer and a printer at an auction for $ 1,950. The printer needed a new drum. The cost of the new drum was $ 390. The used computers fair market value was $ 1,560 if purchased separately. The printer was worth $ 780 without a drum and $ 1,170 with the drum replaced.

3.

On July 1, 2020, FFI sold a delivery truck for $ 7,800. The truck originally cost $ 19,500, and accumulated depreciation on the truck to December 31, 2019, was $ 7,800. The truck was amortized on a straight-line basis over a five-year period, with no residual value. The sale was recorded as a debit to Cash and a credit to Asset Additions and Disposals. No amortization was recorded in the current year.

4.

Due to an office redesign in the Ontario building, FFI traded some old equipment for different equipment with a similar life and value in use. The fair value of the equipment disposed of was $ 3,900. The cost of this equipment was $ 5,460, and the accumulated depreciation on the equipment at December 31, 2019, was $ 2,340. This transaction was not recorded in the books of account. No entry was made to record the exchange.

5.

Shortly after the new factory was completed, vandals attacked the building and caused significant damage. The costs to correct the damage, which were not covered by insurance, included:

New paint to cover graffiti		$ 3,120
Glass for broken windows		7,800
Improved security system		19,500

6.

During the year, the company developed a new piece of exercise equipment that has a built-in video game. It was the policy to amortize development costs on a straight-line basis over three years, with 50% of the normal amount in the year of development. The costs associated with product development included:

Costs to determine how a video game would work with exercise equipment		$ 39,000
Design, testing, and construction of prototype equipment		273,000
Costs to determine the best production process for the new equipment		31,200
Advertising costs to alert customers about the new product		36,660

7.

The company has goodwill and an intangible asset as follows:

Asset		Details		Original Cost as at December 31, 2019		Accumulated Amortization as at December 31, 2019		Amortization Method
Goodwill		Recorded in 2015 when the company took over the business of its predecessor		$ 390,000		$ 0		Not applicable
Customer list		Purchased in 2015 when the company took over the business of its predecessor		$ 195,000		$ 87,750		Straight-line over 10 years

The customer list has lost value and will not provide benefits through to 2025, as was originally predicted. It is now expected to provide undiscounted future cash flows of $ 39,000 in total over the next two years. There are no estimated costs to sell the list, as it will not be sold, and the value in use is $ 35,880. Goodwill has a recoverable value of $ 546,000 as at December 31, 2020.

(a)

New Saskatchewan plant Determine whether each expenditure related to the new Saskatchewan plant must be capitalized or expensed or whether it could be either (depends on policy choice). (Round answers to 0 decimal places, e.g. 5,275.)

		Capitalize		Expense		Policy Choice to Capitalize or Expense
Land		$		$		$
Building
Equipment
Furniture
Training costs
Avoidable interest