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

ANDERS COMPANY
Comparative Balance Sheets
		2017			2016
Plant assets
Equipment	$	255,000		$	345,000
Accum. Depr.—Equipment		(130,000	)		(240,000	)
Equipment, net	$	125,000		$	105,000
Buildings	$	455,000		$	475,000
Accum. Depr.—Buildings		(145,000	)		(330,000	)
Buildings, net	$	310,000		$	145,000

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

During 2017, equipment with a book value of $55,000 and an original cost of $285,000 was sold at a loss of $6,000.

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?

Solutions

Expert Solution

Requirement 1

Cash received on sale = $49,000

Working

Cash received on sale of Equipment
Cost of equipment sold	$ 285,000.00
Less: Accumulated depreciation	$ ( 230,000.00)
Book value of asset sold	$ 55,000.00
Less: loss on sale	$ (6,000.00)
Cash received on sale of equipment	$ 49,000.00

Requirement 2

Depreciation expense on equipment = $120,000

Working

Depreciation expense during year
Accumulated Depreciation beginning balance	$ 240,000.00
Less: Depreciation on equipment sold	$ (230,000.00)
Subtotal	$ 10,000.00
Ending balance of Accumulated depreciation	$ 130,000.00
Depreciation expense during year (130000-10000)	$ 120,000.00

Requirement 3

cost of new equipment purchased by Anders during 2017 = $195,000

Working

Equipment beginning value	$ 345,000.00
Less: Cost of equipment sold	$ 285,000.00
	$ 60,000.00
Equipment Ending value	$ 255,000.00
Equipment purchased during year (255000-60000)	$ 195,000.00

ekkarill92 answered 1 year ago

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