An Improvement Made to an Existing Machine Increased Its Fair

question 34

Multiple Choice

An improvement made to an existing machine increased its fair market value and its production capacity by 30% and extended the machine's useful life by 5 years.How should the cost of the improvements be accounted for?

• A)Expensed
• B)Capitalized
• C)Recorded as a decrease to retained earnings.
• D)Recorded as a decrease in accumulated depreciation.

---

Definitions:

Arbitrary

Decisions or actions taken without any reasonable, logical, or fair justification.

Capricious

Characterized by sudden changes in attitude or behavior without apparent reason; unpredictable.

Abuse Of Discretion

Abuse of discretion refers to a failure to take into proper consideration, the laws and facts relating to a particular matter; an arbitrary or unreasonable departure from precedent and settled judicial custom.

Administrative Agencies

Administrative agencies are government bodies responsible for the oversight and administration of specific functions, such as regulating industries and implementing laws.