Question

Holcomb Industries sold a piece of machinery with a cost of $918,000 and accumulated depreciation of $856,800 for $80,000. They realized a gain of $18,800 on the sale. How would this transaction affect investing activities?

Answer 1

It will have a net positive effect of $80,000

Step-by-step explanation:

Under the heading for Cash flow from investing activities,

$80,000 would be added to other positive figures in this section.

Investing activities usually include the following.

• Purchase or sale of equipment
• Purchase or sale of equity, bonds

The $18,800 amount is realized as a gain in the profit and loss account where as in cash flows we record total net proceeds.

Hope that helps.