Exercise 8-17A (Algo) Effect of revenue expenditures versus capital expenditures on financial statements LO 8-8 Sellers Construction Company purchased a compressor for $118,300 cash. It had an estimated useful life of four years and a $11,800 salvage value. At the beginning of the third year of use, the company spent an additional $6,430 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Income Statement = Stockholders' Equity Balance Sheet Assets Book Value of Compressor 65,050 Statement of Cash Flows Cash + Com. Stk. + Ret. Earn. Rev. Exp. Net Inc. 11,980 + 22,300 + 54,730 NA NA NA NA Required Record the $6,430 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 compressors life. c. The expenditure improved the compressor's operating capacity. Sellers Construction Company Horizontal Statements Model Income Statement Balance Sheet Assets Stockholders' Equity Book Value of Common Retained Cash + Compressor Stock Earnings 11,980 + 65,050 = 22,300 + 54,730 Statement of Cash Flows Revenue Net Income Expenses + a. + = + b. + + C. + +