### Educational Website Transcription:**Tower Company Truck Depreciation and Maintenance Transactions****Background:**Tower Company owned a service truck purchased at the beginning of Year 1 for $32,000. This truck had an estimated life of three years and a salvage value of $5,000. Tower Company employs straight-line depreciation, with its financial condition as of January 1, Year 3, detailed in the horizontal statements model.**Year 3 Expenses on the Truck:**- **January 4:** Engine overhauled for $6,100, extending its life one additional year. Salvage value revised to $4,000. - **July 6:** Oil change and transmission service – $260. - **August 7:** Fan belt and battery replaced – $360. - **December 31:** Gasoline for the year – $7,600. - **December 31:** Recognized Year 3 depreciation expense.---**Requirement:****a. Record Year 3 Transactions in a Statements Model:**- Indicate changes in the Cash Flow column as an Operating Activity (OA), Investing Activity (IA), Financing Activity (FA), or Net Change in Cash (NC).- Leave blank if Statement of Cash Flows is unaffected.- Enter decreases to balances and cash outflows with a minus sign. Not all cells require an entry.**Horizontal Statements Model for Year 3**- **Balance Sheet:** - **Assets:** Includes changes in cash and the book value (BV) of the truck. - **Stockholders' Equity:** Consists of Common Stock and Retained Earnings.- **Income Statement:** - Captures Revenue, Expense, and Net Income.- **Statement of Cash Flow:** - Tracks all cash flow activities.The detailed model tracks the balance, activities on January 4, July 6, August 7, and December 31, showing the financial effects of each transaction throughout Year 3. Balances for cash, truck book value, common stock, retained earnings, revenue, expenses, and net income are displayed, alongside their impacts on cash flows.This clear breakdown helps in understanding the financial positioning and activities related to asset management within the company.

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Description: ### Educational Website Transcription:**Tower Company Truck Depreciation and Maintenance Transactions****Background:**Tower Company owned a service truck purchased at the beginning of Year 1 for $32,000. This truck had an estimated life of three yea

The depreciation is a noncash expense, it means it does not affect cash flows. The depreciation is…

Business

Accounting

Tower Company owned a service truck that was purchased at the beginning of Year 1 for $32,000. It had an estimated life of three years and an estimated salvage value of $5,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model. In Year 3, Tower Company spent the following amounts on the truck: Jan. 4 Overhauled the engine for $6,100. The estimated life was extended one additional year, and the salvage value was revised to $4,000. July 6 Obtained oil change and transmission service, $260. Aug. 7 Replaced the fan belt and battery, $360. Dec.31 Purchased gasoline for the year, $7,600. 31 Recognized Year 3 depreciation expense. Required a. Record the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

Tower Company owned a service truck that was purchased at the beginning of Year 1 for $32,000. It had an estimated life of three years and an estimated salvage value of $5,000. Tower company uses straight-line depreciation. Its financial condition as of January 1, Year 3, is shown on the first line of the horizontal statements model. In Year 3, Tower Company spent the following amounts on the truck: Jan. 4 Overhauled the engine for $6,100. The estimated life was extended one additional year, and the salvage value was revised to $4,000. July 6 Obtained oil change and transmission service, $260. Aug. 7 Replaced the fan belt and battery, $360. Dec.31 Purchased gasoline for the year, $7,600. 31 Recognized Year 3 depreciation expense. Required a. Record the Year 3 transactions in a statements model. (In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), a financing activity (FA), or net change in cash (NC); leave the cell blank if the Statement of Cash Flows is not affected. Enter any decreases to account balances and cash outflows with a minus sign. Not all cells will require entry.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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