Question

In: Accounting

cashflow from operation activities

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:

Solutions

Expert Solution

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

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