Required Review the situations related to replacements and repairs. For each case, prepare the necessary journal...
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Required Review the situations related to replacements and repairs. For each case, prepare the necessary journal entry to record the transaction. Please provide a short justification for your chosen treatment. Case C: An important piece of equipment requires major maintenance. Management has decided to upgrade the machine in the process by installing a new component which will extend the useful life of the machine from three remaining years to five more years. The regular part could have been purchased for $400,000 but the more durable part cost $450,000. The replaced part was not set up as a separate asset when the machine was purchased. Date Accounts Debit Credit PPE - new part Cash 450000 450000 Only the portion of the expenditure that increases the service potential of the PPE can be capitalized because even though all costs are considered recurring maintenance, the replaced part was not set up as a separate asset the first $400,000 is recurring maintenance. Required Review the situations related to replacements and repairs. For each case, prepare the necessary journal entry to record the transaction. Please provide a short justification for your chosen treatment. Case C: An important piece of equipment requires major maintenance. Management has decided to upgrade the machine in the process by installing a new component which will extend the useful life of the machine from three remaining years to five more years. The regular part could have been purchased for $400,000 but the more durable part cost $450,000. The replaced part was not set up as a separate asset when the machine was purchased. Date Accounts Debit Credit PPE - new part Cash 450000 450000 Only the portion of the expenditure that increases the service potential of the PPE can be capitalized because even though all costs are considered recurring maintenance, the replaced part was not set up as a separate asset the first $400,000 is recurring maintenance.
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Related Book For
Accounting concepts and applications
ISBN: 978-0538745482
11th Edition
Authors: Albrecht Stice, Stice Swain
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