McCartney Manufacturing purchased a dryer for $100,000 on January 1, 1993. The estimated life of the dryer
Question:
McCartney Manufacturing purchased a dryer for $100,000 on January 1, 1993. The estimated life of the dryer is five years, and the salvage value is estimated to be $10,000. McCartney uses (Accounting for the straight-line method of depreciation. betterments and maintenance costs) Chapter 9 Long-Lived Assets 465 On January 1, 1997, McCartney paid $160,000 to have the dryer overhauled, which increased the speed of the dryer and extended its estimated useful life to December 31, 2000. Each year McCartney pays $1,000 to have the dryer serviced. On November 12, 1997, a major repair was required at a cost of $5,000. Salvage value is still estimated to be $10,000. REQUIRED:
a. Provide the journal entry on January 1, 1993, to record the purchase of the dryer.
b. How should the service and repair costs be treated on the books of McCartney?
c. Compute the depreciation expense that would be recognized during each year of the dryer’s eight-year useful life
Step by Step Answer: