Terrence Manufacturing pays $5,000 to replace the manual control system on one of its machines with an automated system.The machine is expected to be more productive as a result.How would the company record this transaction?
A)Debit Machinery for $5,000 and credit Cash for $5,000.
B)Debit Repairs Expense for $5,000 and credit Cash for $5,000.
C)Debit Betterment Expense for $5,000 and credit Cash for $5,000.
D)Debit Extraordinary Repair Expense for $5,000 and credit Cash for $5,000.
E)Debit Depreciation Expense for $5,000 and credit Cash for $5,000.

Question

Quizplus · Accepted Answer

The replacement of the manual control system with an automated system is a capital expenditure that should be capitalized as an improvement to the machine.

Terrence Manufacturing Pays $5,000 to Replace the Manual Control System