Oki Company pays $264,350 for equipment expected to last four years and have a $30,000 salvage value. Prepare journal entries to record the following costs related to the equipment. Paid $16,150 cash for a new component that increased the equipment’s productivity. Paid $4,038 cash for minor repairs necessary to keep the equipment working well. Paid $9,100 cash for significant repairs to increase the useful life of the equipment from four to seven years.

a. Debit Equipment with $16,150; and Credit Cash also with $16,150.

b. Debit Repair expenses with $4,038; and Credit Cash also with $4,038.

a. Debit Equipment with $9,100; and Credit Cash also with $9,100.

Explanation:

a. Paid $16,150 cash for a new component that increased the equipment’s productivity.

Details                                     Dr ($)               Cr ($)            

Equipment                               16,150

Cash                                                                   16,150

To record purchase of a new component that increased the equipment’s productivity

b. Paid $4,038 cash for minor repairs necessary to keep the equipment working well.

Details                                     Dr ($)               Cr ($)            

Repair expenses                    4,038

Cash                                                                 4,038

To record payment for minor equipment repair.                    

c. Paid $9,100 cash for significant repairs to increase the useful life of the equipment from four to seven years.

Details                                     Dr ($)               Cr ($)            

Equipment                               9,100

Cash                                                                  9,100

To record significant repairs of equipment that increased its useful life form 4 to 7 years.

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