Fiona's Italian Market purchased a delivery truck for $25,000 at the beginning of Year 1.The truck has an estimated life of five years and an estimated residual value of $5,000.The company plans to use the straight-line depreciation method.At the beginning of Year 2,the company spent $4000 to replace the truck's transmission.This resulted in a two-year extension of useful life,but no change in residual value.
A) What type of cost is the $ \$ 4,000 $ transmission replacement? Explain.

Question

Fiona's Italian Market purchased a delivery truck for $25,000 at the beginning of Year 1.The truck has an estimated life of five years and an estimated residual value of $5,000.The company plans to use the straight-line depreciation method.At the beginning of Year 2,the company spent $4000 to replace the truck's transmission.This resulted in a two-year extension of useful life,but no change in residual value.
 A) What type of cost is the $ \$ 4,000 $ transmission replacement? Explain.

Quizplus · Accepted Answer

The Answer of Fiona's Italian Market purchased a delivery truck for $25,000 at the beginning of Year 1.The truck has an estimated life of five years and an estimated residual value of $5,000.The company plans to use the straight-line depreciation method.At the beginning of Year 2,the company spent $4000 to replace the truck's transmission.This resulted in a two-year extension of useful life,but no change in residual value.
 A) What type of cost is the $ \$ 4,000 $ transmission replacement? Explain.

Fiona's Italian Market Purchased a Delivery Truck for $25,000 at the Beginning