Oki Company pays $291,200 for equipment expected to last four years and have a $

Question

Oki Company pays $291,200 for equipment expected to last four years and have a $30,000 salvage value. Prepare journal entries to record the following costs related to the equipment.

During the second year of the equipment’s life, $25,300 cash is paid for a new component expected to increase the equipment’s productivity by 10% a year.

During the third year, $6,325 cash is paid for normal repairs necessary to keep the equipment in good working order.

During the fourth year, $18,250 is paid for repairs expected to increase the useful life of the equipment from four to five years.

Explanation / Answer

Year Account Titles Debit Credit 1 Equipment 25,300 Cash 25,300 2 Repair Expense 6,325 Cash 6,325 3 Equipment 18,250 Cash 18,250

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