Exercise 8-17A (Algo) Effect of revenue expenditures versus capital expenditures on financial statements LO 8-8 Sellers Construction Company purchased a compressor for $118,600 cash. It had an estimated useful life of four years and a $9,200 salvage value. At the beginning of the third year of use, the company spent an additional $7,780 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Income Statement Balance Sheet Assets Book Value of Compressor 63,900 Statement of Cash Flows Cash Stockholders' Equity Com. Stk. Ret. Earn. 25,200 49,560 + Rev. Exp. . Net Inc. 10,860 + NA NA NA NA Required Record the $7,780 expenditure in the statements model under each of the following independent assumptions: (In the Statement of Cash Flows column, use the initials "OA" for operating activities, "FA" for financing activities, and "IA" for investing activity. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells require input.) a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure Improved the compressor's operating capacity. Income Statement Sellers Construction Company Horizontal Statements Model Balance Sheet Assets Stockholders' Equity Book Value of Common Retained Revenue Compressor Stock Earnings 63,900 = 25,200 + 49,560 Statement of Cash Flows Expenses Net Income = Cash + + 10,860 + a. + + b. + = + C. + 11