The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour. The expenditure for the replacement component should be debited to:
A) Repairs Expense.
B) Maintenance Expense.
C) Equipment.
D) Gain from Repairs.
Answer: C
Which of the following subsequent expenditures would not be capitalized?
A) Unsuccessful legal defense of intangible assets.
B) Additions.
C) Improvements.
D) Successful legal defense of intangible assets.
Answer: A
Which of the following statements accurately describes depreciation?
I. Depreciation is used to allocate the cost of the asset over periods benefited.
II. Depreciation is used to track the fair value of the asset.
III. The book value of an asset is its original cost less accumulated depreciation.
A) I and III
B) I and II
C) II and III
D) All of these statements are correct.
Answer: A
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