On January 1, Year 3, Ruiz Company spent $850 on a plant asset to improve its quality. The asset had been purchased on January 1, Year 1 for $8,400 and had an estimated salvage value of $1,200 and a useful life of five years. Ruiz uses the straight-line depreciation method. Which of the following correctly shows the effects of the Year 3 expenditure on the financial statements?

Question

Quizplus · Accepted Answer

A capital expenditure that improves an asset's quality increases the asset (equipment) account and is reported as a cash outflow for investing activities.

On January 1, Year 3, Ruiz Company Spent $850 on a Plant