The Justin Company\'s heating system has just completed its 12th year of a estim

Question

The Justin Company's heating system has just completed its 12th year of a estimated 15-year life. At date of purchase, the system cost $232,000 and now has accumulated depreciation of $144,000. At the beginning of the next year, the company expects to spend approximately $60,000 for a complete renovation of the system and expects that the total life of the system will be 20 years. What account will be debited for the cost of the renovation?a. renovation expense b.credit to depreciation expense c.accumulated depreciation d. building

please explain

Explanation / Answer

In cases when company does not improve the quantity or quality of the asset itself, but instead extends its useful life, the company debits the expenditure to Acumulated Dereciation rather then to an asset account. The theory behind this approch is that the replacement(renovation) extends the useful life of the asset and thereby recaptures some or all past depreciation. The net carrying amount of the asset is the same whether debiting the asset or accumulated depreciation. c. debit to accumulated depreciation 60,000

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