An improvement made to a machine increased its fair market value and its production capacity by 25 percent without extending the machine's useful life.The cost of the improvement should be
A) expensed.
B) debited to Accumulated Depreciation.
C) capitalized in the machine account.
D) allocated between Accumulated Depreciation and the machine account.

Question

Quizplus · Accepted Answer

The improvement made to the machine has increased its fair market value and production capacity, which means that it has extended the useful life of the machine. Therefore, the cost of the improvement should be capitalized in the machine account, which means that the cost will be added to the cost of the machine and depreciated over the remaining useful life of the machine.

An Improvement Made to a Machine Increased Its Fair Market