The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour.The expenditure for the replacement component should be debited to:
A)Repairs Expense.
B)Maintenance Expense.
C)Equipment.
D)Gain from Repairs.

Question

Quizplus · Accepted Answer

The replacement of a major component has increased the productive capacity of equipment from 10 units per hour to 18 units per hour. This means that the replacement component has added significant value to the equipment and has extended the useful life of the equipment. Thus, this expenditure should be debited to the Equipment account as a capital expenditure rather than expenses like Repairs or Maintenance.

The option D) Gain from Repairs is not appropriate as there is no gain occurring in this situation.

The Replacement of a Major Component Increased the Productive Capacity