Question

During 2019, a team was sold for $ 39,000. The equipment had originally been purchased for $ 64,000 and had a book value of $ 36,000 at the time of sale. The balance of the Accumulated Depreciation account as of December 31, 2018 was $ 172,000 and as of December 31, 2019 it was $ 184,000. Determine and calculate the two adjustments that, based on these data, must be made to net income if the Indirect Method is used to report operational activities in the Statement of Cash Flows. Also, determine whether something should occur in the other two sections of that state as a result of the situation described.

1) indicate nature and calculate amount of adjustment #1

2) Indicate nature and calculate amount of adjustment #2

3) Possible presentation in other sections of Cash Flows Statement

Answer 1

Adjustment 1: Solution: 1
	Calculation of loss o gain on sale of Equipment
	Cost of Equipment	$              64,000
	Less: Accumulated Depreciation ($64,000 - $36,000)	$              28,000
	Book Value	$              36,000
	Less: Sales Price	$              39,000
	Gain on sale of Equipment	$                 3,000
Adjustment 2: Solution: 2
	Calculation of Depreciation expenses
	Beginning balance in accumulated depreciation =	$           1,72,000
	Less: Accumulated depreciation on sale of equipment	$              28,000
	Net Accumulated depreciation	$           1,44,000
	Less Ending balance of Accumulated depreciation	$           1,84,000
	Depreciation expenses of the period	$              40,000
Adjustment 3: Solution: 3
	Statement of Cash Flows - Indirect Method
		Amount in $	Amount in $
	Net Cash flows from operating activities
	Net income		$                    -
	Adjustments for reconcile the net income to:
	Depreciation Expenses	$              40,000
	Gain on sale of Equipment	$               -3,000
			$           37,000
	Net cash from operating activities		$           37,000