What happens if an asset is partway through the useful life and an expenditure is made...

What happens if an asset is partway through the useful life and an expenditure is made that significantly extends the estimated useful life?

Expert Solution

Answer

Her if any asset is partway through the useful life and an expenditure is made that significantly extends the estimated useful life. such expenditure will be capitalized and added to the value of the asset as being of capital nature.

Reason

Any expenditure which is if incurred will result in increase in life of the asset is capitalized and added to the value of assets and will be spread over the new life of the asset. Such expenditure are treated as capital expenditure which is said to give benefit for more than one accounting year or for a longer period. In such case depreciation of the asset will also be recomputed for the remaining extended life of the asset. Revised depreciation will be calculated by spreading over the remaining life of the asset the total of book value of the asset and expenditure incurred for extending the life

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