Question

Oki Company pays $264,350 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. Paid $16,150 cash for a new component that increased the equipment’s productivity. Paid $4,038 cash for minor repairs necessary to keep the equipment working well. Paid $9,100 cash for significant repairs to increase the useful life of the equipment from four to seven years.

Answer 1

a. Debit Equipment with $16,150; and Credit Cash also with $16,150.

b. Debit Repair expenses with $4,038; and Credit Cash also with $4,038.

a. Debit Equipment with $9,100; and Credit Cash also with $9,100.

Step-by-step explanation:

a. Paid $16,150 cash for a new component that increased the equipment’s productivity.

Details Dr ($) Cr ($)

Equipment 16,150

Cash 16,150

To record purchase of a new component that increased the equipment’s productivity

b. Paid $4,038 cash for minor repairs necessary to keep the equipment working well.

Details Dr ($) Cr ($)

Repair expenses 4,038

Cash 4,038

To record payment for minor equipment repair.

c. Paid $9,100 cash for significant repairs to increase the useful life of the equipment from four to seven years.

Details Dr ($) Cr ($)

Equipment 9,100

Cash 9,100

To record significant repairs of equipment that increased its useful life form 4 to 7 years.