Distinguish between capital expenditures and expense; account for plant assets and intangible assets
Response to the following problem:
The following questions are unrelated except that they all apply to plant assets and intangible assets:
1. The manager of Carpet World regularly debits the cost of repairs and maintenance of plant assets to Plant and Equipment. Why would she do that, since she knows she is violating GAAP?
2. The manager of Horizon Software regularly buys plant assets and debits the cost to Repairs and Maintenance Expense. Why would he do that, since he knows this action violates GAAP?
3. It has been suggested that because many intangible assets have no value except to the company that owns them, they should be valued at $1.00 or zero on the balance sheet. Many accountants disagree with this view. Which view do you support? Why?