Repair Cost

[dududu100]

Just ran into a question below listing the “repair to roof and windows” as a capitlized cost while an example on the Kaplan notes showing “repair and maintenance” as a cost expensed when incurred. So, i am confused now. could anyone help explain why repair cost could be considered as both types? Thank you!


Initial cost
€35.00
Repairs to roof and windows
2.00
Modifications to interiors
0.50
Total cost
€37.5 million

 

[akthem]

You expense repair and maintenance costs that are recurring and you capitalize the ones that are infrequent.
So, I guess here you have to assume that repairing windows does not happen every year, and therefore you would capitalize the costs

 

[Snah]

You can/should capitalize any expense that you consider will give you a benefit in the future.
If, for example, you change the windows for a new ones that improve your energy saving; that is an improvement and can be capitalized. It is a very common practice in accountancy
If is an improvement you can capitalized if is a replacement or a small repair is expensed.
I hope this helps

 

[dududu100]

Thank you for your answers! Finally understood this concept now. Thanks!

 

[Snah]

dududu100 wrote:
Thank you for your answers! Finally understood this concept now. Thanks!

You are welcome,
Good luck