Problem 6-32A (Static) Accounting for continuing expenditures LO 6-2, 6-7 Tower Company owned a service truck that was purchased at the beginning of Year 1 for $31,000. It had an estimated life of three years and an estimated salvage value of $4,000. 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: January 4 Overhauled the engine for $6,000. The estimated life was extended one additional year, and the salvage value was revised to $3,000. July 6 Obtained oil change and transmission service, $250. August 7 Replaced the fan belt and battery, $350. December Purchased gasoline for the year, $7,500. 31 December Recognized Year 3 depreciation expense. 31 Required Record the Year 3 transactions in a statements model. Note: In the Statement of Cash Flows column, use the initials OA for operating activities, FA for financing activities, or IA for investing activity. Enter any decreases to account balances or cash outflows with a minus sign. Leave cells blank if no input is needed. TOWER COMPANY Horizontal Statements Model for Year 3 Income Statement Balance Sheet Assets Stockholders' Equity Statement of Date Book Value Common Cash of Truck Stock Retained Earnings Revenue Expenses = Net Income Cash Flows Balance 20,000+ 13,000 = 9,000 + 24,000 I = + + = 1/4 7/6 + 8/7 + 12/31 12/31 Total = *NC Net change in cash + + ++ ++ + = = = = + + = NC*