Question
Mayfields is a restaurant chain that currently has 8 locations in Chicago. Mayfields is a privately held company with a September 30 th fiscal year
Mayfields is a restaurant chain that currently has 8 locations in Chicago. Mayfields is a privately held company with a September 30th fiscal year end. The company has decided to expand their restaurant operations into a new territory. During August 2022 Mayfields spent $200,000 on constructing a new restaurant. Mayfields also spent $6,000 on hiring and training new employees. The company is classifying these expenditures as start-up expenditures.
The CEO of Mayfields believes that the $206,000 of start-up expenditures should be recognized as an asset since the expenditures will benefit the future operations of the company for many years. The company recognized these expenditures as follows:
8/31/22 Start Up Costs (an asset) 206,000
Cash 206,000
Accounting Issue: Is Mayfields correctly recognizing the $206,000 of start-up costs?
- Codification Reference:
Your answer/interpretation of the guidance:
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started