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Sellers Construction Company purchased a compressor for $101,900 cash. It had an estimated useful life of four years and a $10,100 salvage value. At the
Sellers Construction Company purchased a compressor for $101,900 cash. It had an estimated useful life of four years and a $10,100 salvage value. At the beginning of the third year of use, the company spent an additional $8,730 related to the equipment. The company's financial condition just prior to this expenditure is shown in the first line of the table. Required Record the $8,730 expenditure in the statements model under each of the following independent assumptions: (In the Cash Flow column, use the initials OA for operating activities, FA for financing activities, or IA for investing activity. If there is no effect on the Cash Flow, leave the cell blank. Enter any decreases to account balances with a minus sign. Not all cells will require entry.) a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity. SELLERS CONSTRUCTION COMPANY Horizontal Statements Model Balance Sheet Income Statement Stockholders' Equity Statement of Cash Flows Liabilities + Revenue Expenses Net Income Assets Book Value Cash + of Compressor 11,470 + 56,000 = Common Stock + Retained Earnings + 25,500 + 41,970 a. b. + + + - +++ + + + C
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