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How will a $37 million expansion to retool an assembly plan impact GM's financial statements?

How will a $37 million expansion to retool an assembly plan impact GM's financial statements?. Original blog posting (July 29, 2014). General Motors considering $37 million expansion to assembly plant.

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How will a $37 million expansion to retool an assembly plan impact GM's financial statements?

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  1. How will a $37 million expansion to retool an assembly plan impact GM's financial statements? Original blog posting (July 29, 2014)

  2. General Motors considering $37 million expansion to assembly plant • Lansing, Michigan, assembly plant currently manufactures Buick Enclave, Chevrolet Traverse, and GMC Acadia • GM may retool plant to manufacture Chevrolet Camero • GM has applied for tax incentives from the City of Lansing

  3. Question 1 Would the $37 million be treated as an expense or as a capital expenditure? Why?

  4. Question 2 What impact will the $37 million have on GM’s 2015 income statement? Explain.

  5. Question 3 What impact will the $37 million have on GM’s 2015 balance sheet? Explain.

  6. Question 4 Now think about GM’s 2016 financial statements. Assuming that GM makes the $37 million investment in 2015, how will its income statement and balance sheet be impacted in 2016? Explain.

  7. Question Recap • Would the $37 million be treated as an expense or as a capital expenditure? Why? • What impact will the $37 million have on GM’s 2015 income statement? Explain. • What impact will the $37 million have on GM’s 2015 balance sheet? Explain. • Now think about GM’s 2016 financial statements. Assuming that GM makes the $37 million investment in 2015, how will its income statement and balance sheet be impacted in 2016? Explain.

  8. For additional news stories to use in the accounting classroom, see the Accounting in the Headlines blog at http://accountingintheheadlines.com/Related video resources can be found at http://www.youtube.com/user/accountingheadlinesQuestions or comments? Contact Dr. Wendy Tietz at wtietz@kent.edu

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