Manufacturing facilities

In October 2018, CTI decided to expand its facility to accommodate the new aseptically

packaged product line. The cost to expand and modify the plant was $6 million. The

costs were all capitalized to the cost of the plant and included the following:

interest on the financing required

machinery necessary for the aseptic packaging process

$200,000 for the licence for the new food product line

The licence for the new food product line is issued annually by federal health inspectors

for compliance with food safety regulations. The current licence expires in August 2020.

can they capitalize these costs and why?