In: Accounting
A machine with a cost of $136,000 and accumulated depreciation of $88,000 is sold for $42.400 cash. The amount of the loss related to the sale of this machine should be reported in the operating section under the indirect method is:
loss related to the sale of this machine should be reported in the cash flow from the operating section under the indirect method is $5,600
cost of the machine = $136,000
Accummulated depreciation = $88,000
Loss on sale of machine = Book value - Market value
The correct answer would be $5,600
Loss on sale of machine should be reported (added) in the Operation activities section of the cash flow statement. First, we need to calculate the book value.
Book value = Cost of machine - Accumulated depreciation
= $136,000 - $88,000
= $48,000
Loss on sale of machine = Book value - Market value
= $48,000-$42,400
= $5,600