EXPENDITURES AFTER ACQUISITION
Roanoke Manufacturing placed a robotic arm on a large assembly machine on January 1, 2009. The assembly machine was acquired on January 1, 2002 and was expected to last another three years. The following information is available concerning the assembly machine.
Cost, assembly machine $750,000
Accumulated depreciation, 1/1/2009 480,000
The robotic arm cost $210,000 and was expected to extend the useful life of the machine by three years. Therefore, the useful life of the assembly machine, after the arm replacement, is six years. The assembly machine is expected to have a residual value of $120,000 at the end of its useful life.
Required:
1. Prepare the journal entry necessary to record the addition of the robotic arm.
2. Compute 2009 depreciation expense for the machine and prepare the necessary journal entry.
3. What is the book value of the machine at the end of 2009?
4. What would have been the effect on the financial statements if Roanoke Manufacturing had expensed the addition of the robotic arm?