Kenco bought a new packing machine on september 15. By october 1 the machine had been installed, all the employees had been traind to use it, and it was in full operational use. The factory manager told the accountant : i know the machine is running the way we hoped it would. But i want you to capitalize all of the machines operating expenses through our december 31 yearend.

Required:

1- what would be the effect on the companys income statement and balance sheet for the current year if three months of operating expenses are capitalized? Why would the company manager want to do this?

2- is it ethical to capitalize costs that should be expensed?