Sellers Construction Company purchased a compressor for $110,200 cash. It had an estimated useful life of four years and a $9,500 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: Note: 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. a. POP b. С Cash Assets 13,690 + + + Book Value of Compressor 59,850 W Liabilities + = Balance Sheet W + + + SELLERS CONSTRUCTION COMPANY Horizontal Statements Model Stockholders Equity Common Stock 24,600+ + + + Retained Revenue Earnings 48,940 Income Statement ** Expenses = Net Income Statement of Cash Flows

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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306.

Sellers Construction Company purchased a compressor for $110,200 cash. It had an estimated useful life of four years and a $9,500
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:
Note: 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.
la.
b.
Assets
Cash +
13,690 +
Book Value
of
Compressor
59,850
= Liabilities
=
Balance Sheet
=
+
SELLERS CONSTRUCTION COMPANY
Horizontal Statements Model
Stockholders' Equity
Common
Stock
24,600 +
+
+
Retained
Earnings
48,940
Revenue
Income Statement
Expenses
m
B
Net Income
Statement of
Cash Flows
Transcribed Image Text:Sellers Construction Company purchased a compressor for $110,200 cash. It had an estimated useful life of four years and a $9,500 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: Note: 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. la. b. Assets Cash + 13,690 + Book Value of Compressor 59,850 = Liabilities = Balance Sheet = + SELLERS CONSTRUCTION COMPANY Horizontal Statements Model Stockholders' Equity Common Stock 24,600 + + + Retained Earnings 48,940 Revenue Income Statement Expenses m B Net Income Statement of Cash Flows
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