TLR Inc.has installed a piece of machinery for a total of $76,000.In its third month of operation,repairs of $1,300 had to be made on the machine.This $1,300 would be:
A)added to the cost of the machinery.
B)treated as a repairs and maintenance expense.
C)capitalized in an asset account.
D)deducted from cost of the machinery.

Question

Quizplus · Accepted Answer

The repairs of $1,300 should be treated as a repairs and maintenance expense, rather than added to the cost of the machinery or capitalized in an asset account. This is because repairs and maintenance expenses are considered ongoing expenses associated with keeping the machinery operational, and are not considered part of the original cost of the asset. Deducting the repair cost from the cost of the machinery would not be appropriate either, as the repair cost is not a direct cost of the original acquisition.

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