# During the current year, Arkells Inc. made the following expenditures relating to plant machinery. • Renovated five machines for \$100,000 to improve efficiency in production of their remaining useful life of five years • Low-cost repairs throughout the year totaled \$70,000 • Replaced a broken gear on a machine for \$10,000 A. What amount should be expensed during the period? B. What amount should be capitalized during the period?

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### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685

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FindFindarrow_forward

### Principles of Accounting Volume 1

19th Edition
OpenStax
Publisher: OpenStax College
ISBN: 9781947172685
Chapter 11, Problem 4PA
Textbook Problem
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## During the current year, Arkells Inc. made the following expenditures relating to plant machinery.• Renovated five machines for \$100,000 to improve efficiency in production of their remaining useful life of five years• Low-cost repairs throughout the year totaled \$70,000• Replaced a broken gear on a machine for \$10,000A. What amount should be expensed during the period?B. What amount should be capitalized during the period?

To determine

(a)

Introduction:

When the cost is incurred to increase the value and the life of an asset, then it needs to be capitalized in the books of accounts and shown in the balance sheet and is depreciated over the years.

To state:

Amount to be expensed during the period by Company A.

### Explanation of Solution

Calculation of amount to be expensed by company A during the period:

 Particulars Amount (\$) Low-cost repairs 70,000...
To determine

(b)

Introduction:

When the cost is incurred to increase the value and the life of an asset, it needs to be capitalized in the books of accounts and shown in the balance sheet and is depreciated over the years.

To state:

Amount to be capitalized during the period by Company A.

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