Use the following information for the Quick Study below. The plant assets sectio

Question

Use the following information for the Quick Study below.

The plant assets section of the comparative balance sheets of Anders Company is reported below.

QS 16-5 Indirect: Computing investing cash flows LO P2

During 2017, equipment with a book value of $43,000 and an original cost of $225,000 was sold at a loss of $3,600.

1. How much cash did Anders receive from the sale of equipment?
  


2. How much depreciation expense was recorded on equipment during 2017?
  


3. What was the cost of new equipment purchased by Anders during 2017?

ANDERS COMPANY Comparative Balance Sheets 2017 2016 Plant assets Equipment $ 195,000 $ 285,000 Accum. Depr.—Equipment (106,000 ) (216,000 ) Equipment, net $ 89,000 $ 69,000 Buildings $ 395,000 $ 415,000 Accum. Depr.—Buildings (109,000 ) (294,000 ) Buildings, net $ 286,000 $ 121,000

Explanation / Answer

1. Cash receive from the sale of equipment:
Book value of equipment $43,000
Less: Loss on Sale $3,600
Cash receive from the sale of equipment $39,400

2. Depreciation expense was recorded on equipment during 2017:

Accumulated depreciation on equipment sold = $225,000 - $43,000 = $182,000

Depreciation expense was recorded on equipment during 2017 = $106,000 + $182,000 - $216,000 = $72,000

3. Cost of new equipment purchased by Anders during 2017:
= $195,000 + $225,000 - $285,000 = $135,000   

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