Question

The Plant Assets account and Accumulated Depreciation -- Plant Assets account of Star Media show the following:

Plant Assets
Beg. 100,000
Acquisitions 428,000 , 52,500 Disposals
End. 475,500
Accumulated Depreciation -- Plant Assets
20,000 12/31/15
Disposals 10,500 , 34,000 Depr. Exp.
Star Media sold plant assets at an $11,000 loss. Where on the statement of cash flows should Star Media report the sale of plant​ assets? How much should the business report for the​ sale?

Answer 1

The statement of cash flows should Star Media report the sale of plant​ assets under investing activities and the sale value is $31,000.

Step-by-step explanation:

The cash flow statements deal with three types of statements which include operating activities, investing activities, and financing activities.

The operating activities record those transactions which impact the working capital or we can say increase or decrease in the current assets and current liabilities.

The investing activities deal with the purchase and sale of fixed assets

The financing activities deal with the issue of shares, repayment of the debt, etc.

So,

The cash flow of Star Media should report the sale of plant​ assets under investing activities

And, the selling value of assets is calculated by using an equation which is shown below:

= Disposal value of plant - accumulated depreciation of disposal - loss on the sale of assets

= 52,500 - 10,500 - 11,000

= $31,000

Hence, the statement of cash flows should Star Media report the sale of plant​ assets under investing activities and the sale value is $31,000.