Effect of revenue expenditures versus capital expenditures on financial statements
Sequoia Construction Company purchased a forklift for $110,000 cash. It had an estimated useful life of four years and a $10,000 salvage value. At the beginning of the third year of use, the company spent an additional $8,000 that was related to the forklift. The companyâ€™s financial condition just prior to this expenditure is shown in the following statements model.
Record the $8,000 expenditure in the statements model under each of the following independent assumptions:
a. The expenditure was for routine maintenance.
b. The expenditure extended the forkliftâ€™s life.
c. The expenditure improved the forkliftâ€™s operating capacity.