Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

With COVID-19 restrictions finally lifting, chris and steve are pooling their substantial financial resources & have purchased the road Inn, a historic bed & breakfast

With COVID-19 restrictions finally lifting, chris and steve are pooling their substantial financial resources & have purchased the road Inn, a historic bed & breakfast located in Vermont near popular ski resorts and tourist attractions. The Inn is situated on 10 acres and Alex and Blake were able to also purchase the attached maple syrup operation comprised of 400 acres of mature maple trees used to produce the roas Inn popular maple syrup which is sold in high end specialty gift shops across the country.

In late 2019 Chris and steve had the entire property appraised (see below) but given the tourist industry decline in the last 12 months they were ultimately able to negotiate a much better price paying only $2,600,000 in total for all assets listed in the appraisal. Even so, the appraisal report provided the following values for the properties purchased:

At the end of the syruping season chris & steve spent $125,000 on the syruping operations as shown below:

(i) $25,000 to add digital temperature controls to the sap boilers. These control units attach to the existing boilers and regulate heat thus avoiding burned sap and increasing the overall production volume for the syruping operation.

(ii) $25,000 at the end of the season to clean excess sap from within the syruping equipment filtering systems. This annual task allows the syruping equipment to start next year at normal production levels without delays caused by sap clogs having developed during the off season.

(iii) $25,000 to prune 1/3 of the maple tree grove. chris and steve keep all trees on a 3-year pruning rotation. Pruning is necessary to maintain optimum tree health as it keeps a tree at a desired size and removes unnecessary branches that cause structural stress.

(iv) $25,000 to add an additional external filtering system. The filtering system will not alter production volume but will better protect the equipment from debris resulting in the existing equipment lasting longer.

(v) $25,000 to fertilize all 400 wooded acres intended to maintain the health of the tree grove over the long cold Vermont winter.

Consider the $125,000 of expenditures described above. What value (if any) would be considered "Ordinary Repairs"?

Group of answer choices

$75,000

$50,000

$0

$100,000

$25,000

$125,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Petroleum Accounting Principles Procedures And Issues

Authors: Dennis Jennings, Joe Feiten, Horace Brock

5th Edition

0940966255, 978-0940966253

More Books

Students also viewed these Accounting questions

Question

=+Do flexible schedules change the demand for resources?

Answered: 1 week ago

Question

Describe the Big Five personality dimensions.

Answered: 1 week ago

Question

Identify three personal human relations goals for the course.

Answered: 1 week ago