Reference no: EM133057221
Question - McClain Company incurred the following expenditures during 2019:
Apr. 9 The air conditioning system in the old manufacturing facility was replaced for $89,500. The old air conditioning system had a cost of $74,750 and a book value of $2,900. The old air conditioning system had no scrap value.
June 29 Annual maintenance of $39,500 was performed.
Sept. 12 The roof of the old manufacturing facility is replaced at a cost of $70,000. This expenditure substantially extended the life of the facility.
Dec. 28 A new wing was added to the manufacturing facility at a cost of $255,000. 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
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