A firm's Net Property, Plant & Equipment balance is $14,300,000 on January 1, 2018 and $12,850,000...

A firm's Net Property, Plant & Equipment balance is $14,300,000 on January 1, 2018 and $12,850,000 on December 31, 2018. The firm's Accumulated Depreciation balance is $4,500,000 on January 1, 2018 and $5,650,000 on December 31, 2018. What is the net purchases or net sales of Property, Plant and Equipment in 2018?

Multiple Choice

$1,450,000 net purchase
$1,450,000 net sale
$300,000 net sale
$300,000 net purchase

Expert Solution

A firm's Net Property, Plant & Equipment balance is $14,300,000 on January 1, 2018 and $12,850,000 on December 31, 2018. The firm's Accumulated Depreciation balance is $4,500,000 on January 1, 2018 and $5,650,000 on December 31, 2018.
What is the net purchases or net sales of Property, Plant and Equipment in 2018?

Answer: $300,000 net sale

Workings

Particular	Amount
Net Property, Plant & Equipment balance on January 1	$14,300,000
Net Property, Plant & Equipment balance on December 31, 2018	$12,850,000
Total decease in Plant & Equipment during the year ($14,300,000 – $12,850,000)	$1,450,000
Less : Current depreciation (note 1)	$1,150,000
There for net sale for the year (note 2)	$300,000

Note1: Current depreciation

Current depreciation = Accumulated Depreciation on 31/12/2018 - Accumulated Depreciation on 1-1-2018

= $5,650,000 – $4,500,000

= $1,150,000

Note2:

During the year 2018, Net Property, Plant & Equipment decreased by $1,450,000 but out of which current year depreciation is only $1,150,000, which means there is a sale of Property, Plant & Equipment during the year amounting $300,000

jeff jeffy answered 2 years ago

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