yester mfg co has had a piece of equipment for 6 years at the beginning of the seven 538636

Account for capital and revenue expenditures (expenses) and calculate depreciation expense (.LO 2,4)

Yester Mfg. Co. has had a piece of equipment for 6 years. At the beginning of the seventh year, the equipment was not performing as well as expected. First, Yester relubricated the equipment, which cost $150. Then, the company replaced some worn-out parts, which cost $520. Finally, at the beginning of the seventh year, the company completed a major overhaul of the equipment that not only fixed the machine but also added new functionality and extended its useful life by 3 years (to a total of 10 years) with no salvage value. The overhaul cost $10,000. (Originally, the machine cost $60,000, had a salvage value of $4,000, and had an estimated useful life of 7 years.)

a. Which of these costs are capital expenditures? How would these amounts appear on the financial statements?

b. Which are revenue expenditures? How would these amounts appear on the financial statements?

c. Assuming Yester Mfg. uses the straight-line method of depreciation, how much depreciation expense will be reported on the income statements for years 7 through 10?