Reference no: EM132885408

Problem - Expenditures after Acquisition McClain Company incurred the following expenditures during 2019:

Apr. 9 The air conditioning system in the old manufacturing facility was replaced for $83,000. The old air conditioning system had a cost of $74,000 and a book value of $2,000. The old air conditioning system had no scrap value.

June 29 Annual maintenance of $38,000 was performed.

Sept. 12 The roof of the old manufacturing facility is replaced at a cost of $65,000. This expenditure substantially extended the life of the facility.

Dec. 28 A new wing was added to the manufacturing facility at a cost of $275,000. This expenditure substantially increased the productive capacity of the plant.

Required -

1. Prepare journal entries to record McClain's expenditures for 2019.

2. What is the effect on the financial statements if management had improperly accounted for the:

a. addition of the new wing to the manufacturing facility

b. annual maintenance expenditures