Question

QS 16-7 Computing cash from asset sales LO P3

The following selected information is from Ellerby Company’s comparative balance sheets.

At December 31	2017				2016
Furniture	$	157,500			$	218,500
Accumulated depreciation—Furniture		(97,200	)			(119,200	)

The income statement reports depreciation expense for the year of $26,500. Also, furniture costing $61,000 was sold for its book value on December 31, 2017.

Complete the general ledger accounts to calculate the cash received from the sale of furniture.
  

	Furniture Beg. bal. End. bal. Accumulated Depreciation Beg. bal. End. bal. Cost Accumulated depreciation Book value (Cash received)

Sale of short-term investments	$	3,000
Cash collections from customers		7,900
Purchase of used equipment		2,600
Depreciation expense		1,000

Compute cash flows from investing activities using the above company information. (Amounts to be deducted should be indicated by a minus sign.)
  

A comparative balance sheet and income statement is shown for Cruz, Inc.

CRUZ, INC. Comparative Balance Sheets December 31, 2017
		2017				2016
Assets
Cash	$	75,900			$	18,900
Accounts receivable, net		32,600				40,100
Inventory		68,300				75,300
Prepaid expenses		4,200				3,500
Total current assets		181,000				137,800
Furniture		84,600				99,200
Accum. depreciation—Furniture		(13,100	)			(7,500	)
Total assets	$	252,500			$	229,500
Liabilities and Equity
Accounts payable	$	11,900			$	16,900
Wages payable		7,100				4,000
Income taxes payable		1,200				2,200
Total current liabilities		20,200				23,100
Notes payable (long-term)		24,800				58,400
Total liabilities		45,000				81,500
Equity
Common stock, $5 par value		177,300				141,500
Retained earnings		30,200				6,500
Total liabilities and equity	$	252,500			$	229,500

   

CRUZ, INC. Income Statement For Year Ended December 31, 2017
Sales				$	392,900
Cost of goods sold					252,900
Gross profit					140,000
Operating expenses
Depreciation expense	$	30,200
Other expenses		71,600			101,800
Income before taxes					38,200
Income taxes expense					13,900
Net income				$	24,300

Furniture costing $67,600 is sold at its book value in 2017. Acquisitions of furniture total $53,000 cash, on which no depreciation is necessary because it is acquired at year-end. What is the cash inflow related to the sale of furniture?
  

	Furniture Beg. bal. End. bal. 0 Accumulated Depreciation Beg. bal. End. bal. 0 Cost Accumulated depreciation Book value (Cash received) $0

Answer 1

Furniture
Beg bal	218,500	61,000	sale of assets
end bal	157,500
Accumulated Depreciation
Beg bal		119,200
sale of assets	48,500	26,500	dep expense
end bal		97,200
cost			61,000
Accumulated depreciation			48,500
book value(cash received)			12,500

2)	Cash flow from investing activities
	purchase of used Equipment				-2,600
	Cash flow from investing activities				-2,600

Cruz

Furniture
Beg bal	99,200	67,600	sale of assets
	53,000
end bal	84,600
Accumulated Depreciation
Beg bal		7,500
sale of assets	24,600	30,200	dep expense
end bal		13,100
cost			67,600
Accumulated depreciation			24,600
book value(cash received)			43,000