Marshall Company purchased a truck for deliveries for $25,000 at the beginning of 2011. The truck had an estimated life of 5 years, and an estimated salvage value of $5,000. Marshall used the straight-line depreciation method. At the beginning of 2012, Marshall incurred $4,000 to replace the truck's transmission. This resulted in a 2-year extension of the truck's useful life, but no change in the residual value.
A) What type of cost is the $4,000? Explain.

Question

Marshall Company purchased a truck for deliveries for $25,000 at the beginning of 2011. The truck had an estimated life of 5 years, and an estimated salvage value of $5,000. Marshall used the straight-line depreciation method. At the beginning of 2012, Marshall incurred $4,000 to replace the truck's transmission. This resulted in a 2-year extension of the truck's useful life, but no change in the residual value.
 A) What type of cost is the $4,000? Explain.

Quizplus · Accepted Answer

The Answer of Marshall Company purchased a truck for deliveries for $25,000 at the beginning of 2011. The truck had an estimated life of 5 years, and an estimated salvage value of $5,000. Marshall used the straight-line depreciation method. At the beginning of 2012, Marshall incurred $4,000 to replace the truck's transmission. This resulted in a 2-year extension of the truck's useful life, but no change in the residual value.
 A) What type of cost is the $4,000? Explain.

Marshall Company Purchased a Truck for Deliveries for $25,000 at the Beginning