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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?

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Your answer/interpretation of the guidance:

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