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Sellers Construction Company purchased a compressor for $100,100 cash. It had an estimated useful life...

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Accounting

Sellers Construction Company purchased a compressor for $100,100 cash. It had an estimated useful life of four years and a $8,700 salvage value. At the beginning of the third year of use, the company spent an additional $7,130 related to the equipment. The companys financial condition just prior to this expenditure is shown in the following statements model.

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Rev. - Exp. = Net Inc. Cash Flow Cash 13,800 + + Assets Book Value of Compressor 54,400 = = = Equity Com. Stk. + Ret. Earn. 22,600 + 45,600 N A - NA = NA NA Required Record the $7,130 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.) a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity. Stockholders' Equity Revenue - Expenses = Net Income Cash Flow Assets Book Value Cash of Compressor 13,800 + 54,400 = Common Stock 22,600 + Retained Earnings 45,600

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