Question

In: Accounting

1. Required information Use the following information for the Quick Study below. The plant assets section...

1. Required information

Use the following information for the Quick Study below.

The plant assets section of the comparative balance sheets of Anders Company is reported below.

ANDERS COMPANY
Comparative Balance Sheets
2017 2016
Plant assets
Equipment $ 220,000 $ 310,000
Accum. Depr.—Equipment (116,000 ) (226,000 )
Equipment, net $ 104,000 $ 84,000
Buildings $ 420,000 $ 440,000
Accum. Depr.—Buildings (124,000 ) (309,000 )
Buildings, net $ 296,000 $ 131,000

QS 16-6 Indirect: Computing investing cash flows LO P2

During 2017, a building with a book value of $78,000 and an original cost of $340,000 was sold at a gain of $68,000.

1. How much cash did Anders receive from the sale of the building?
2. How much depreciation expense was recorded on buildings during 2017?
3. What was the cost of buildings purchased by Anders during 2017?

1.Cash received from the sale of building:

2.Depreciation expense:

3.Purchase of building:

Solutions

Expert Solution

Original cost of $340,000

Book value of bulidings = $78,000

Gain on sale = $68,000

1. Cash received from the sale = Sale price = Book value + Gain = $78,000 + $68,000 = $146,000

2. Depreciation Expense during 2017:

When an asset is sold, asset's cost along with asset's accumulated depreciation will be removed from the balance sheet.

Beginning Accumulated Depreciation of buildings for the year 2017 $309,000

Less: Accumulated Depreciation of the building sold ($340,000 - $78,000)

[Original Cost - Book Value = Accumulated Depreciation]

($262,000)
$47,000
Ending Accumulated Depreciation of the buildings for the year 2017 $124,000
Difference ---> Depreciation expenses [$124,000 - $47,000] $77,000

3. Buildings Purchase during 2017

Beginning Original cost of the buildings for the year 2017 $440,000
Less: Original cost of the building sold ($340,000)
$100,000
Ending Original cost of the buildings for the year 2017 $420,000
Difference ---> Purchases during 2017 [$420,000 - $100,000] $320,000

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