An improvement made to a machine increased its production capacity by 25% without extending the machine's useful life.The cost of the improvement should be

Question

Quizplus · Accepted Answer

The improvement made to the machine increased its production capacity permanently, which is a betterment to the machine itself. Therefore, the cost of the improvement should be capitalized and added to the machine account as it enhances the machine's usefulness and increases its service potential. It should not be expensed, debited to Accumulated Depreciation or allocated between Accumulated Depreciation and the machine account.

An Improvement Made to a Machine Increased Its Production Capacity