Exercise 8-14 Ordinary repairs, extraordinary repairs, and betterments LO C3 050

Question

Exercise 8-14 Ordinary repairs, extraordinary repairs, and betterments LO C3 050 for equipment expected to last four years and have a $30,000 salvage Oki Company pays $299, value. Prepare journal entries to record the following costs related to the equipment. During the second year of the equipment's lif, $23,450 cash is paid for a new component expected to increase the equipment's productivity by 10% a year During the third year, $5,863 cash is paid for normal repairs necessary to keep the equipment in good working order During the fourth year, $16,400 is paid for repairs expected to increase the useful life of the equipment from four to five years

Explanation / Answer

S.no

General Journal

Debit

credit

1

Equipment

$23,450

     Cash

$23,450

(Amount paid for purchase of new component of equipment)

2

Repairs expense

$5,863

    Cash

$5,863

(Amount paid for normal repairs)

3

Equipment

    cash

$16,400

(Amount paid for repairs to improve the useful life of the equipment)

$16,400

S.no

General Journal

Debit

credit

1

Equipment

$23,450

     Cash

$23,450

(Amount paid for purchase of new component of equipment)

2

Repairs expense

$5,863

    Cash

$5,863

(Amount paid for normal repairs)

3

Equipment

    cash

$16,400

(Amount paid for repairs to improve the useful life of the equipment)

$16,400

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