Chapter 10, Problem 14E

Exercise 10-14
Ordinary repairs, extraordinary repairs, and betterments
C3
Old Company pays $264,000 for equipment expected to last four years and have a $29,000 salvage value. Prepare journal entries to record the following costs related to the equipment.

1. During the second year of the equipment’s life, $22,000 cash is paid for a new component expected to increase the equipment’s productivity by 10% a year.
2. During the third year, $6,250 cash is paid for normal repairs necessary to keep the equipment in good working order.
3. During the fourth year, $14,870 is paid for repairs expected to increase the useful life of the equipment from four to five years.