Question
Sellers Construction Company purchased a compressor for $117,400 cash. It had an estimated useful life of four years and a $11,600 salvage value. At the
Sellers Construction Company purchased a compressor for $117,400 cash. It had an estimated useful life of four years and a $11,600 salvage value. At the beginning of the third year of use, the company spent an additional $9,130 related to the equipment. The companys financial condition just prior to this expenditure is shown in the following statements model:
Balance Sheet | Income Statement | Statement of Cash Flows | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Assets | = | Stockholders' Equity | ||||||||||
Cash | + | Book Value of Compressor | = | Common Stock | + | Retained Earnings | Revenue | Expense | = | Net Income | ||
10,450 | + | 64,500 | = | 23,400 | + | 51,550 | NA | NA | = | NA | NA |
Required
Record the $9,130 expenditure in the statements model under each of the following independent assumptions:
Note: 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.
The expenditure was for routine maintenance.
The expenditure extended the compressors life.
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