Question

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

Answer 1

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