Equipment transaction and cash flow reporting Property, plant, & equipment Dec.
ID: 2377852 • Letter: E
Question
Equipment transaction and cash flow reporting
Property, plant, & equipment
Dec. 31, 20X8
Dec. 31, 20X7
Land
$72,000
$72,000
Equipment
630,000
520,000
Less: Accumulated depreciation
-308,000
-325,000
New equipment purchased during 20x8 totaled $175,000. The 20x8 income statement disclosed equipment depreciation expense of $34,000 and a $2,000 loss on the sale of equipment.
a. Determine the cost and accumulated depreciation of the equipment sold during 20X8. 394,000
b. Determine the selling price of the equipment sold.
c. Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Property, plant, & equipment
Dec. 31, 20X8
Dec. 31, 20X7
Land
$72,000
$72,000
Equipment
630,000
520,000
Less: Accumulated depreciation
-308,000
-325,000
Explanation / Answer
a.Determine the cost and accumulated depreciation of the equipment sold during 20X8.
Cost of Equipment Sold = 520000+175000-630000 = $65000
Accumulated depreciation of the equipment sold = 325000+34000-308000 = $51000
b.Determine the selling price of the equipment sold.
Selling price of the equipment sold = 65000-51000 -2000 = $12000
c.Show how the sale of equipment would appear on a statement of cash flows prepared by using the indirect method.
Sale of Equipment Should be shown in Cash flow from Investing Activity = $12000
Loss on sale of Equipment should be added Under cash flow from Operating Activity
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