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Exercise 8-17B Effect of revenue expenditures versus capital expenditures on financial statements Ford...

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Accounting

Exercise 8-17B Effect of revenue expenditures versus capital expenditures on financial statements
Ford Construction Company purchased a forklift for $150,000 cash. It had an estimated useful life of four years and a $10,000 salvage value. At the beginning of the third year of use, the company spent an additional $9,000 that was related to the forklift. The company's financial condition just prior to this expenditure is shown in the following statements model.
\table[[Balance Sheet,Income Statement,\table[[Statement of],[Cash Flow]]],[,,Assets,=,,k. Ec,dity,,,,],[Cash,+,Book Value of Forklift,=,C. Stk.,+,Ret. Earn.,Rev.,- Exp.,=,Net Inc.],[15,000,+,80,000,=,45,000,+,50,000,NA,NA,=,NA,NA]]
Required
Record the $9,000 expenditure in the statements model under each of the following independent assumptions:
a. The expenditure was for routine maintenance.
b. The expenditure extended the forklift's life.
c. The expenditure improved the forklift's operating capacity.
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