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.

Question

Quizplus · Accepted Answer

The replacement of a major component that increases productive capacity is considered a capital expenditure and should be debited to the Equipment account. This is because it improves the efficiency and productivity of the equipment, thereby extending its useful life and generating future benefits. Repairs and maintenance expenses, on the other hand, are considered routine and recurring expenses that only maintain the existing level of performance, and do not add any significant value to the asset.

The Replacement of a Major Component Increased the Productive Capacity