Tower Company owned a service truck that was purchased at the beginning of Year 1 for $49,000. It had an estimated life of three years and an estimated salvage value of $4,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model.

In Year 3, Tower Company spent the following amounts on the truck:

Jan.	4		Overhauled the engine for $7,800. The estimated life was extended one additional year, and the salvage value was revised to $3,000.
July	6		Obtained oil change and transmission service, $430.
Aug.	7		Replaced the fan belt and battery, $530.
Dec.	31		Purchased gasoline for the year, $9,300.
	31		Recognized Year 3 depreciation expense.

Required

Record the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

Tower Company owned a service truck that was purchased at the beginning of Year 1 for $49,000. It had an estimated life of three years and an estimated salvage value of $4,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model.

In Year 3, Tower Company spent the following amounts on the truck:

Jan.	4		Overhauled the engine for $7,800. The estimated life was extended one additional year, and the salvage value was revised to $3,000.
July	6		Obtained oil change and transmission service, $430.
Aug.	7		Replaced the fan belt and battery, $530.
Dec.	31		Purchased gasoline for the year, $9,300.
	31		Recognized Year 3 depreciation expense.

Required

Record the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

TOWER COMPANY

Horizontal Statements Model for Year 3

Balance Sheet

Income Statement

Statement of Cash Flow

Assets

=

Stockholders Equity

Revenue

Expense

=

Net Income

Date

Cash

+

BV Truck

=

Common Stock

+

Retained Earnings

Balance

38,000

+

19,000

=

16,000

+

41,000

=

1/4

+

=

+

=

7/6

+

=

+

=

8/7

+

=

+

=

12/31

+

=

+

=

12/31

+

=

+

=

Total

+

=

+

=