The replacement of a major component increased the productive capacity of equipment from 10 units per hour to 18 units per hour.The expenditure for the replacement component should be debited to:

Question

Quizplus · Accepted Answer

The replacement of a major component resulted in an increase in the productive capacity of the equipment. This is not a routine repair or maintenance expense but rather a capital expenditure that enhances the efficiency and effectiveness of the equipment. As such, the cost of the replacement component should be capitalized and debited to the Equipment account.

The Replacement of a Major Component Increased the Productive Capacity