During the current year, the following expenditures were made by XYZ Company:

Feb. 30		The electrical system was completely updated at a cost of $45,000. The cost of the old electrical system was not known
April.17		A machine that was purchased for $10,000 and has a book value of $1,000 is sold for $1,200 and replaced by a new machine that has a cost of $18,000.
April 23		Plant layout is rearranged at a cost of $30,000 by issuing 3-monthes notes.
June 18		A major part breaks on a machine that cost $15,000 in 2006. The part is replaced at a cost of $7,000. The replacement extends the useful life of the machine.
June 23		Because of increased demands for its product, the company increased its plant capacity by building a new addition at a cost of $670,000.
Aug.15		A machine breaks down unexpectedly and requires repairs of $95.
Aug. 25 Aug. 28		One of the buildings was repainting at a cost 7500. 1000 $ is paid as maintenance expenses for the company vehicles.

Required:

1. Enumerate the conditions to capitalize subsequent costs. (4 marks)

2. Prepare general journal entries for the transactions. Assume that all expenditures were paid in cash.