Exercise 8-17A (Algo) Effect of revenue expenditures versus capital expenditures on financial statements LO 8-8 Sellers Construction Company purchased a compressor for $103,300 cash. It had an estimated useful life of four years and a $8,400 salvage value. At the beginning of the third year of use, the company spent an additional $7,110 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Balance Sheet Assets Cash + 13,900 + Book Value of Compressor . 55,850 . a b. C Required Record the $7,110 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. Cash a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity. Assets . 13,900. . . Stockholders' Equity Retained + Earnings 46,350 Common Stock 23,400 Book Value of Compressor Balance Sheet 55,850 . = " Common Stock Income Statement Statement of Revenue Expense Net Income Cash Flows NA NA NA NA Sellers Construction Company Horizontal Statements Model Stockholders' Equity 23,400+ + + Retained Earnings 46,350 Revenue Income Statement Expenses Net Income Statement of Cash Flows
Exercise 8-17A (Algo) Effect of revenue expenditures versus capital expenditures on financial statements LO 8-8 Sellers Construction Company purchased a compressor for $103,300 cash. It had an estimated useful life of four years and a $8,400 salvage value. At the beginning of the third year of use, the company spent an additional $7,110 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Balance Sheet Assets Cash + 13,900 + Book Value of Compressor . 55,850 . a b. C Required Record the $7,110 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. Cash a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity. Assets . 13,900. . . Stockholders' Equity Retained + Earnings 46,350 Common Stock 23,400 Book Value of Compressor Balance Sheet 55,850 . = " Common Stock Income Statement Statement of Revenue Expense Net Income Cash Flows NA NA NA NA Sellers Construction Company Horizontal Statements Model Stockholders' Equity 23,400+ + + Retained Earnings 46,350 Revenue Income Statement Expenses Net Income Statement of Cash Flows
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Exercise 8-17A (Algo) Effect of revenue expenditures versus capital expenditures on financial
statements LO 8-8
Sellers Construction Company purchased a compressor for $103,300 cash. It had an estimated useful life of four years and a $8,400
salvage value. At the beginning of the third year of use, the company spent an additional $7,110 related to the equipment. The
company's financial condition just prior to this expenditure is shown in the following statements model:
Cash
13,900 +
Assets
Book Value of
Compressor
55,850
a.
b.
C.
Cash
Balance Sheet
Assets
a. The expenditure was for routine maintenance.
b. The expenditure extended the compressor's life.
c. The expenditure improved the compressor's operating capacity.
13,900 +
Required
Record the $7,110 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.
+++
Stockholders' Equity
Retained
Earnings
46,350
Common
+
Stock
23,400 +
Book Value of
Compressor
Balance Sheet
55,850
W
Revenue
NA
Stockholders' Equity
Common
Stock
23,400 +
Sellers Construction Company
Horizontal Statements Model
Income Statement
Retained
Earnings
Statement of
Expense Net Income Cash Flows
NA = NA
NA
46,350
Revenue
Income Statement
Expenses
Net
Income
Statement of Cash
Flows
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