[The following information applies to the questions displayed below.] Hulme Comp

Question

[The following information applies to the questions displayed below.] Hulme Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2014, an asset account for the company showed the following balances: Manufacturing equipment Accumulated depreciation through 2013 $ 141,100 65,700 During 2014, the following expenditures were incurred for the equipment: Routine maintenance and repairs on the equipment Major overhaul of the equipment that improved efficiency on January 2, 2014 $1,000 15,000 The equipment is being depreciated on a straight-line basis over an estimated life of 17 years with a $17,000 estimated residual value. The annual accounting period ends on December 31.

Explanation / Answer

1)

Yearly depreciation expense = (141,100 - 17,000) / 17 = $7,300

Dr. Depreciation Expense 7,300

Accumulated Depreciation 7,300

2)

Asset used in years =65,700 accumulated depreciation / 7,300 expense = 9 yrs.

Remaining life computation = 17 yrs estimated life - 9 yrs used = 8 years Ans.

3)

Repair:

Dr. Maintenance Expense 1,000   

Cr. Cash 1,000

Upgrade:

Dr. Equipment 15,000

Cr. Cash 15,000

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