For each of the items below, prepare the appropriate entry.
a. | ||||||||
Cost of improving an asset can be capitalized if the improvement extends the useful | ||||||||
life of the asset,improves efficiency or provides some other improvement in economic | ||||||||
benefits to the company | ||||||||
Since,the useful life of the truck would be extended due the overhaul,the cost would be | ||||||||
capitalized and will be amortized over the remaining useful life of the truck | ||||||||
Account Title | Debit | Credit | ||||||
Asset - Truck | $4,000 | |||||||
Accounts payable | $4,000 | |||||||
b. | ||||||||
Salary payable to James for the week in which he spent the entrire week in unloading | ||||||||
and setting new machinery would be capitalized alongwith the cost of new machinery | ||||||||
as his salary would part of the installation cost of the machinery. | ||||||||
Account Title | Debit | Credit | ||||||
Salary - James | $1,500 | |||||||
Salaries payable | $1,500 | |||||||
(to book salary payable) | ||||||||
Account Title | Debit | Credit | ||||||
Asset - New machinery | $1,500 | |||||||
Salary - James | $1,500 | |||||||
(to capitalize James' Salary with the New Machine) | ||||||||
c. | ||||||||
Ordinary repairs are expenses and would charged to the relevant expense accounts | ||||||||
Account Title | Debit | Credit | ||||||
Repairs & maintenance - Machinery | $1,600 | |||||||
Cash | $1,600 | |||||||
d. | ||||||||
Cost of improving an asset can be capitalized if the improvement extends the useful | ||||||||
life of the asset,improves efficiency or provides some other improvement in economic | ||||||||
benefits to the company | ||||||||
Since these adjustments will improve the efficiency of the machine, we would capitalize | ||||||||
these adjustment costs to be amortized over the useful life of the asset | ||||||||
Account Title | Debit | Credit | ||||||
Asset - Machinery | $10,000 | |||||||
Cash | $10,000 | |||||||
For each of the items below, prepare the appropriate entry. A motor in one of Excel’s...