An improvement made to an existing machine increased its fair market value and its production capacity by 30% and extended the machine's useful life by 5 years.How should the cost of the improvements be accounted for?

Question

Quizplus · Accepted Answer

The improvements made to the machine have resulted in an increase in fair market value and production capacity, and extended its useful life, indicating that the machine's future economic benefits have increased. Therefore, the cost of improvements should be capitalized as a new asset, and amortized over the extended useful life of the machine.

An Improvement Made to an Existing Machine Increased Its Fair