Recording Subsequent Expenditures After 25% of the useful life had expired on equipment with an original cost of $150,000 and no salvage value, a major component of the equipment is unexpectedly replaced. The old component was expected to last as long as the equipment itself, and the company’s accounting records on the component indicate it originally cost $30,000 and had no expected salvage value. The replacement component cost $45,000 and has no usefulness beyond that of the equipment. Prepare the entries to record the component replacement, assuming a cash purchase. Note: Record debit accounts in alphabetical order using the first letter of the account name. Account Name Dr. Cr. AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer To remove old component. AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer To record replacement.

Recording Subsequent Expenditures After 25% of the useful life had expired on equipment with an original cost of $150,000 and no salvage value, a major component of the equipment is unexpectedly replaced. The old component was expected to last as long as the equipment itself, and the company’s accounting records on the component indicate it originally cost $30,000 and had no expected salvage value. The replacement component cost $45,000 and has no usefulness beyond that of the equipment. Prepare the entries to record the component replacement, assuming a cash purchase. Note: Record debit accounts in alphabetical order using the first letter of the account name. Account Name Dr. Cr. AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer To remove old component. AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A Answer Answer To record replacement.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Recording Subsequent Expenditures

After 25% of the useful life had expired on equipment with an original cost of $150,000 and no salvage value, a major component of the equipment is unexpectedly replaced. The old component was expected to last as long as the equipment itself, and the company’s accounting records on the component indicate it originally cost $30,000 and had no expected salvage value. The replacement component cost $45,000 and has no usefulness beyond that of the equipment.

Prepare the entries to record the component replacement, assuming a cash purchase.
Note: Record debit accounts in alphabetical order using the first letter of the account name.

Account Name	Dr.	Cr.
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
To remove old component.
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
AnswerCashPrepaid InsuranceEquipmentBuildingLandConstruction in ProcessAccumulated DepreciationAccounts PayableProperty Tax PayableAsset Retirement ObligationNote PayableDiscount on Note PayableCommon StockPaid-in Capital in Excess of Par—Common StockContribution RevenueGain on Asset ExchangeAccretion ExpenseDepreciation ExpenseInsurance ExpenseInterest ExpenseRepair ExpenseLoss on Asset ExchangeLoss on Asset ReplacementLoss on Construction of BuildingLoss on DisposalLoss on Settlement of Asset Retirement ObligationN/A	Answer	Answer
To record replacement.

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