Question

Thorp Construction Company purchased a compressor for $48,000 cash. It had an estimated useful life of four years and a $4,000 salvage value. At the beginning of the third year of use, the company spent an additional $5,000 related to the equipment. The company’s financial condition just prior to this expenditure is shown in the following statements model:


Required
Record the $5,000 expenditure in the statements model under each of the following independent assumptions:
a. The expenditure was for routine maintenance.
b. The expenditure extended the compressor’s life.
c. The expenditure improved the compressor’s operatingcapacity.


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  • CreatedOctober 26, 2013
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