Indicate how each event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Increase = IDecrease = DNo Effect = NA(Note that "No Effect" means that the event does not effect that element of the financial statements or that the event causes an increase in that element that is offset by a decrease in that same element.) Benitez Company purchased an asset for $50,000. The asset has an estimated salvage value of zero and an 8-year useful life. On January 1, Year 3, the company spent $2,400 cash on routine repairs and maintenance. What effect will the Year 3 expenditure have on the company's financial statements?AssetsLiabilitiesStk. EquityRevenuesExpensesNetStmt.
of ?IncomeCash Flows???????
What will be an ideal response?
(D) (NA) (D) (NA) (I) (D) (D)
Expenditures for routine repairs and maintenance are expensed when incurred and do not affect the asset or its depreciation. The routine repair and maintenance will decrease assets (cash) and stockholders' equity (retained earnings). It will increase expenses (repair and maintenance expense) and decrease net income. It will be reported as a cash outflow for operating activities on the statement of cash flows.
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