Equipment with an original cost of $51,422 and accumulated depreciation of $33,306 was sold at a...

Equipment with an original cost of $51,422 and accumulated depreciation of $33,306 was sold at a loss of $5,155. As a result of this transaction, cash would

a.increase by $12,961

b.increase by $51,422

c.decrease by $5,155

d.decrease by $33,306

Solutions

Expert Solution

Option(A) Increase by $12,961 is correct.

*By comparing an asset’s book value (cost less accumulated depreciation) with its selling price.

*The company may show either a gain or loss. If the sales price is greater than the asset’s book value, the company shows a gain. If the sales price is less than the asset’s book value, the company shows a loss.

Account info	Debit	Credit
Cash (balance)	$12,961
Accumulated depreciation	$33,306
Loss from disposal of asset	$5,155
Equipment		$51,422

*Equipment Original cost = $51,422
Less: Accumulated Depreciation = $33,306
Net Equipment value = $18,116
Less: sale value (cash received)= $12,961
Net Loss from disposal = ($5,155)

Hene, Cash balance increased by $12,961.

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