An important piece of equipment requires major maintenance. Management has decided to upgrade the machine, by installing a new component which will extend the useful life of the machine from the three remaining years to five more years. The regular part could have been purchased for $75,000 but a more reliable part cost $225,000. The replaced part was not set up as a separate asset when the machine was purchased.
Prepare the necessary journal entry to record the transaction. Provide a short justification for your chosen treatment.

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The Answer of An important piece of equipment requires major maintenance. Management has decided to upgrade the machine, by installing a new component which will extend the useful life of the machine from the three remaining years to five more years. The regular part could have been purchased for $75,000 but a more reliable part cost $225,000. The replaced part was not set up as a separate asset when the machine was purchased.
Prepare the necessary journal entry to record the transaction. Provide a short justification for your chosen treatment.

An Important Piece of Equipment Requires Major Maintenance