Question

Wiater Company operates a small manufacturing facility. On January 1, 2015, an asset account for the company showed the following balances:


Equipment   $ 200,000   
Accumulated Depreciation (beginning of the year) 62,000   

During the first week of January 2018, the following expenditures were incurred for repairs and maintenance:


Routine maintenance and repairs on the equipment   $ 2,450
Major overhaul of the equipment that improved efficiency      27,000     

The equipment is being depreciated on a straight-line basis over an estimated life of 15 years with a $15,000 estimated residual value. The annual accounting period ends on December 31.

Required:
Indicate the effects (accounts, amounts, and + for increase and − for decrease) of the following two items on the accounting equation, using the headings shown below. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.)

1.   The adjustment for depreciation made last year at the end of 2017.
2.   The two expenditures for repairs and maintenance during January 2018.

Items Assets = Liabilities + Stockholders Equity

2017 ------ ------ ------

2018 ------ ------ --------

If your could please put the label next to the number so where the label represents the number next to it when filling in the blanks of the chart above that would be appreciated. Thanks.

Answer 1

Assets Liabilities 11 Stockholders 'Equity + Retained Earnings -$12,333 + Retained Earnings -$2,450 2017 Equipment 2018 Cash Cash Equipment -$12,333 -$2,450 = -$27,000 $27,000/= 11 + + Note (i) Cost $200,000 Salvage Value $15,000 Useful Life Straight Line Depreciation = (Cost - Salvage Value)/useful life Straight Line Depreciation $12,333 [$200000-$15000)/15 Note (ii) The expenditure incurred on the assets which increases the efficiency of the Assets, than the expenditure incurred will be capitalised