At December 31, 2021, the Following Data Were Available for a Building

question 112

Essay

At December 31, 2021, the following data were available for a building owned by Omega Company:
$$\begin{array} { | l | r | } \hline \text { Building cost } & \$ 700,000 \\\hline \text { Accumulated depreciation - building } & 525,000 \\\hline \text { Estimated residual value at end of the useful life } & 25,000 \\\hline \text { Estimated remaining useful life } & 15 \\\hline\end{array}$$ A small room was built on the back of the building at a cost of $45,000. The room was completed on June 30, 2022 and was used as office space commencing July 2, 2022. The company uses straight-line depreciation, and accounts for partial years using the number of months the asset is available for use.
Required:
How much is the impact of this expenditure on income before taxes for 2022?

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Definitions:

Indirect Materials

Materials used in the production process but not directly traceable to a specific product, such as lubricants and adhesives used in machinery.

Direct Materials Cost

The expense associated with the raw materials and components used in the manufacturing of a product.

Work In Process

Inventory that includes goods that are in the production process but are not yet completed, representing a component of a manufacturing company's current assets.

Manufacturing Overhead Cost

Expenses related to the manufacturing process that cannot be directly traced to individual products, such as factory rent, utilities, and equipment depreciation.