Sellers Construction Company purchased a compressor for $119,600 cash. It had an estimated useful life of...

 

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Sellers Construction Company purchased a compressor for $119,600 cash. It had an estimated useful life of four years and a $9,400 salvage value. At the beginning of the third year of use, the company spent an additional $6.720 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Balance Sheet Assets Book Value of Compressor 64,500 Cash 11,780 + Stockholders' Equity Retained Earnings 53,780 Common Stock + 22,500 Income Statement Statement of Revenue Expense Net Income Cash Flows NA NA NA Required Record the $6.720 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. a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity. Sellers Construction Company purchased a compressor for $119,600 cash. It had an estimated useful life of four years and a $9,400 salvage value. At the beginning of the third year of use, the company spent an additional $6.720 related to the equipment. The company's financial condition just prior to this expenditure is shown in the following statements model: Balance Sheet Assets Book Value of Compressor 64,500 Cash 11,780 + Stockholders' Equity Retained Earnings 53,780 Common Stock + 22,500 Income Statement Statement of Revenue Expense Net Income Cash Flows NA NA NA Required Record the $6.720 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. a. The expenditure was for routine maintenance. b. The expenditure extended the compressor's life. c. The expenditure improved the compressor's operating capacity.

Answer rating: 100% (QA)

a The expenditure was for routine maintenance Balance Sheet Assets Compressor 119600 Book Value of Compressor 110200 Common Stock 11780 Retained Earnings 22500 Total Stockholders Equity 34280 Income S... View the full answer