On January 1, 2013, Owens Company spent $850 on a plant asset to improve its quality. The asset had been purchased on January 1, 2010 for $4,200 and had an estimated salvage value of $600 and a useful life of five years. Owens uses the straight-line depreciation method. Which of the following correctly shows the effects of the 2013 expenditure on the financial statements?

Question

Quizplus · Accepted Answer

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

On January 1, 2013, Owens Company Spent $850 on a Plant