Question

On January 1, Year 2 Boothe Company paid $12,000 cash to extend the useful life of a machine. Which general journal entries would be required to recognize this expenditure?

Answer 1

Answer:

January 1, 2016:

Dr Accumulated Depreciation account 12,000

Cr Cash account 12,000

Explanation:

The accumulated depreciation account is a contra asset account used to record all the incurred depreciation expense since the asset (or assets) was being used or put into service.

Since the repairs extended the life cycle of the asset, then its accumulated depreciation decreases.