Problem 2
On July 1, 2023, Jackson Co. purchased manufacturing equipment for $880,000. The equipment is expected to
have a salvage value of $40,000 and a useful life of 12 years. Straight-line depreciation is applied for the years
2023, 2024, and 2025. In 2026, maintenance costs of $36,000 are incurred to maintain standard operational
performance. Additionally, $115,000 is invested to enhance the equipment's efficiency and extend its serviceable
life. Starting in 2026, the adjusted useful life is estimated to be 12 additional years, and the updated salvage
value is $25,000.
Prepare journal entries to record:
(a) Depreciation for 2023.
(b) Depreciation for 2025.
(c) The $36,000 in maintenance that occurred in 2026. (Assume it was paid in cash.)
(d) The $115,000 in equipment improvement that occurred in 2026. (Assume Jackson issued a Note
Payable for this equipment improvement.)
(e) Depreciation for 2026.
Calculations: