1. Sandburg is a new carry out restaurant that began operations in December, 2020. During the start up of the organization Sandburg incurred $100,000 in constructing out the restaurant/carryout space plus hiring and training of the new employees. The CEO is very concerned about the potential of incurring a net loss during the initial entry into the competitive restaurant market. The CEO of Sandburg believes that the $100,000 of start up costs should be recognized as an asset since the expenditures will benefit the future operations of the company for many years. The controller assigned you to research this issue to determine the correct way to record these expenditures (i.e. no journal entry has been recorded yet)

Accounting Issue: Is Sandburg permitted to recognize the $100,000 of start up costs as an asset?

1. Codification Reference:

2. Guidance: (cut and paste the guidance)

3. Your answer/interpretation of the guidance for how it applies to Sandburg:

4. Prepare the necessary journal entry.