Capital vs. Revenue Expenditures

The following statements model depicts the financial condition of Boston Mechanical Company just prior to an expenditure of $1,000 cash.

Required

Show the effects of the expenditure on the statements model under the following three separate scenarios.

Exp Liab. Equity Cash Flow Net Inc. Assets Rev. = Cash Equip. Ret. Ear. +Accum. Dep. = (2,000) 1,000 -0- 5,000 4,000 -0- - -0- 0- -0- + Paid $1,000 cash for routine maintenance cost. 1. Exp Liab. + Cash Flow Equity Net Inc. Assets Rev. (. Cash Dep.) Equip. Ret. Ear. -0- -0- = (2,000) 1,000 5,000 -0- 4,000 -0- -0- + Paid $1,000 cash to improve the quality of the equipment. 2. Exp Liab. + Cash Flow Equity Assets Rev. Net Inc. (. Cash+ Equip. Dep.) Ret. Ear. + 1,000 5,000 (2,000) -0- 4,000 -0- - -0- = -0- -0- + + + Paid $1,000 cash to extend the useful life of the equipment. 3. Exp Liab. + Cash Flow Equity Net Inc. Assets Rev. (. Dep.) Cash + Equip. Ret. Ear. + 5,000 (2,000) 4,000 1,000 -0- -0- -0- = -0- -0- = + +