On October 1, 2007, Tri-State Power Company added transmission lines costing $25,000 to improve transmission capacity on a transmission system having a book value of $90,000. The transmission system has 25 years of estimated remaining life with a $5,000 residual value on October 1.
In addition, on October 1, a generator with an original cost of $40,000 and accumulated depreciation of $36,000 was overhauled at a cost of $20,000. The overhaul extended the remaining life of the generator to 12 years with no residual value.
a. Record the journal entries on October 1 for the transmission system improvement and generator extraordinary repair.
b. Record the adjusting journal entry on December 31 to record the depreciation expense for the two fixed assets.
c. Determine the book value of the two fixed assets on December 31.