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Q50. A special repair to a machine will extend the life of the machine an additional four years beyond the original estimated
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Answer #1

Answer -

C. a capital expenditure.

Explanation:

A special repair to a machine will extend the life of the machine an additional four years beyond the original estimated life of 5 years. the $75000 cost of this repair is a capital expenditure.

Here,

Special repair or extraordinary repairs are extensive repairs to property or equipment which prolong its useful life and increase its book value.

Special repairs are capitalized, which means the repair cost increases the book value of the property or equipment simultaneously increasing depreciation expenses over the revised remaining life of property or equipment. Ordinary repairs are simply recorded as expenses and leaving the book value of the asset unchanged.

Or

According to GAAP (generally accepted accounting principles) special or extraordinary repairs are generally capitalized if the useful life is increased by more than a year.

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