Question
Rexs Reclaimers entered into a contract with Dans Demolition to manage the processing of recycled materials on Dans various demolition projects. Services for the 3-year
Rexs Reclaimers entered into a contract with Dans Demolition to manage the processing of recycled materials on Dans various demolition projects. Services for the 3-year contract include collecting, sorting, and transporting reclaimed materials to recycling centers or contractors who will reuse them. Rexs incurs selling commission costs of $2,040 to obtain the contract. Before performing the services, Rexs also designs and builds specialty receptacles and loading equipment that interfaces with Dans demolition equipment at a cost of $27,540. These receptacles and equipment are retained by Rexs. Dans promises to pay a fixed fee of $12,240 per year, payable every 6 months for the services under the contract. Rexs incurs the following costs: design services for the receptacles to interface with Dans equipment $3,060, loading equipment controllers $6,120, and special testing and OSHA inspection fees $2,040 (some of Dans projects are on government property).
Determine the costs that should be capitalized as part of Rexs Reclaimers revenue arrangement with Dans Demolition.
For column A: Commission costs, controllors, testing and inspection fees, or design costs
$ | |
$ | |
$ |
Dans also expects to incur general and administrative costs related to this contract, as well as costs of wasted materials and labor that likely cannot be factored into the contract price. Can these costs be capitalized?
Yes or No?
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