Question

An improvement made to a machine increased its fair market value & production capacity by 25% without extending the machine's useful life. The cost of the improvement should be: a) expensed b) debited to accumulated depreciation c) capitalize in the machine account d) allocated between accumulated depreciation & the machine account

Answer 1

c) capitalize in the machine account

Step-by-step explanation:

Since it is given that there is an improvement made to a machine due to which it increases the machine fair market value and at the same time it also increases the production capacity of 25% without extending the useful life of the machine

So as the question is talking about the improvement of the machine so the same is to be capitalized in the machine account

Hence, the option c is correct