Review the situations related to replacements and repairs. For eachcase, prepare the necessary journal entry to record the transaction. Please provide a short justification for your chosen treatment.

CaseA:

Every threeyears, a major component(Part #45) in a machine must be replaced. By doing this regular but expensiverepair, the machine can be used for 15 years. If Part#45 were notreplaced, the machine could be used only for a maximum of six years. When the machine was originally purchased for $12,000,000, it was set up as one asset and depreciated over its estimated useful life of 15 years.Recently, this repair was completed at a cost of $550,000 for Part#45. The earlier Part#45 cost $400,000 when it was installed three years ago. Neither the old nor the new Part#45 has residual value.

CaseB:

This is the same as Case A except Part#45 is recognized as a separate PPE asset and depreciated over three years.

CaseC:

An important piece of equipment requires major maintenance. Management has decided to upgrade the machine in the process by installing a new component which will extend the useful life of the machine from three remaining years to five more years. The regular part could have been purchased for $75,000 but the more durable part cost $135,000. The replaced part was not set up as a separate asset when the machine was purchased.

CaseD:

A large piece ofearth-moving equipment was upgraded at a cost of $260,000 so that it canself-unload. After the upgrade wascompleted, management estimated that this feature would save the company $35,000 a year for the next six years.

CaseE:

A truck has a new engine installed for $160,000 which will increase gas mileage by25% and reduce pollution. The truck and engine were not set up as separate assets. Management confidently estimates that the cost of the engine isone-third of the overall cost of the truck. Thetruck's original cost was $330,000 and it is40% depreciated.

CaseF:

A car rental company has a fleet of 32,000 cars. Every threemonths, all the cars are given scheduled oilchanges, tirerotation, and replacement of small components. The cost per car is $190, which is $50 in parts and $140 for the wages ofin-house mechanics. This is $6,080,000 in total. For half of thecars, a satellite radio receiver was installed at a cost of $90 each(total $1,440,000). The gadget allows the car to receive satellite radio. The company will provide this service free and promote it heavily to increase rentals. This advertising campaign will cost $2,200,000. After the original free use of the satellitefeature, the company will charge later users a fee for the use of satellite radio.