Question

An equipment appears in the balance sheet of a company at $15,000 with a remaining
useful life of 3 years. During the year, the company incurred an amount of $3,480 to repair
the equipment which increased the useful life of the equipment from 3 years to 5 years.
Prepare the journal entry to show the amount incurred to repair the equipment.
2. Debit Repairs expense account for $3.480 and credit the Cash account for $3,480
b. Debit Repairs expense account for $3,480 and credit the Equipment account for
$3,480
c. Debit Equipment account for $3,480 and credit the Cash account for $3,480
d. Debit Equipment account for $3,480 and credit the Repairs expense account for
$3.480​

Answer 1

The correct answer is C

Explanation:

The journal entry to record the amount incurred to repair the equipment is as:

For Simple Repairs

The journal entry would be:

Repairs A/c.............................Dr  $3,480

        Cash A/c............................Cr  $3,480

Being repair to equipment is recorded and paid in cash

For repairs which will extend the life of the equipment or increase the value assuming that the equipment was capitalized, the entry would be:

Equipment A/c............................Dr $3,480

           Cash A/c.............................Cr  $3,480

Being repair to equipment is recorded and paid in cash

So, in this case, the useful life of the equipment increases so, the second journal will be recorded. Therefore, the correct answer is C

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