Sellers Construction Company purchased a compressor for $116,100 cash. It had an estimated...
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Sellers Construction Company purchased a compressor for $116,100 cash. It had an estimated useful life of four years and a $8,900 salvage value. At the beginning of the third year of use, the company spent an additional $7,370 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 $7,370 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. Balance Sheet SELLERS CONSTRUCTION COMPANY Horizontal Statements Model Income Statement Stockholders' Equity Common Retained Revenue Expenses + Stock Earnings Statement of Cash Flows Liabilities + Net Income Assets Book Value = Cash + of Compressor 12,790 + 62,500 = + 26,000 + 49,290 = a. + + = b. + = + + = C. + =
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