Random Company Ltd is a large, publicly held company whose share are actively traded on the NYSE and that has earnings before tax of 300 million per year. The company has spent 15 million in the current year to improve the basic literacy skills of its employees to allow for the introduction of high-tech, computerized automated equipment. without this training, efficient and effective implementation of the new production process is unlikely to occur. Management on Random Company proposes that the entire amount be capitalized and amortized over the next 15 years ( the estimated average remaining working life of the trained workers ).

In answering this question, ignore specific accounting standards and refer to basic accounting principles and concepts to justify your positions.

1. Provide three arguments in support of expensing the 15$ million in the year incurred.

2. Provide three arguments in support of capitalizing the 15 million.

3. Assuming these costs were capitalized, do you agree with the 15 year amortization period? Explain your answer