A company spends \$5,000 on a capital improvement for a machine. How does this affect the balance sheet and future depreciation?

• A. The asset value decreases by \$5,000, and depreciation expense will decrease over the asset's useful life.
• B. The asset value remains unchanged, and depreciation expense is unaffected.
• C. The asset value increases by \$5,000, and depreciation expense will increase over the asset's useful life.
• D. The asset value increases by \$5,000, but depreciation expense is unaffected.

Answer: (C)