CM Replaced a Major Component in Plant a Which Has

question 100

Essay

CM replaced a major component in Plant A which has been operating 20 years and has a 30-year estimated useful life. The new replacement component cost $150,000 cash. When the plant was constructed, the old component cost $60,000. Give the entry (or entries) to record this transaction.

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Definitions:

Depreciation

The gradual decrease in the economic value of the capital stock of a firm, nation, or other entity, either through physical wear and tear or through obsolescence.

Capacity Utilization Rate

A measure of how well an entity is using its potential output capacity, often expressed as a percentage.

Recessions

Periods of economic decline marked by falling GDP and other economic indicators, often resulting in higher unemployment rates.

Office Machines

Equipment used in an office environment for administrative or clerical tasks, such as printers, copiers, and computers.