Accounting for continuing expenditures
Shaw Manufacturing paid $62,000 to purchase a computerized assembly machine on January 1, 2008. The machine had an estimated life of eight years and a $2,000 salvage value. Shaw’s financial condition as of January 1, 2011, is shown in the following financial statements model. Shaw uses the straight line method for depreciation.
|
Assets |
= |
Equity |
Rev. |
Exp. |
= |
Net Inc. |
Cash Flow |
|||||||
|
Cash |
+ |
Mach. |
Acc. Dep. |
= |
Com. Stk |
+ |
Ret. Earn. |
|||||||
|
15,000 |
+ |
62,000 |
22,500 |
= |
8,000 |
+ |
46,500 |
NA |
NA |
= |
NA |
NA |
Shaw Manufacturing made the following expenditures on the computerized assembly machine in 2011.
Jan. 2 Added an overdrive mechanism for $6,000 that would improve the overall quality of the performance of the machine but would not extend its life. The salvage value was revised to $3,000.
Aug. 1 Performed routine maintenance, $1,150.
Oct. 2 Replaced some computer chips (considered routine), $950.
Dec. 31 Recognized 2011 depreciation expense.
Required
Record the 2011 transactions in a statements model like the preceding one.