Reference no: EM132489210

Question - Recording Depreciation and Repairs

Namir Company operates a small manufacturing facility as a supplement to its regular service activities. At the beginning of 2020, an asset account for the company showed the following balances:

Manufacturing equipment $120,000

Accumulated depreciation through 2019 51,750

During 2020, the following expenditures were incurred for the equipment:

Routine maintenance and repairs on the equipment $1,500

Major overhaul of the equipment that improved efficiency on January 2, 2020 12,500

The equipment is being depreciated on a straight-line basis over an estimated life of 10 years with a $5,000 estimated residual value. The annual accounting period ends on December 31.

Required -

1. Prepare the adjusting entry that was made at the end of 2019 for depreciation on the manufacturing equipment.

2. Starting at the beginning of 2020, what is the remaining estimated life?

3. Prepare the journal entries to record the two expenditures during 2020.