Question

If a company sells equipment with accumulated depreciation totaling $4,200 and an original cost of $5,100, for a loss of $400, what amount will appear in the investing activities section of the statement of cash flows?

Answer 1

The amount that will appear in the investing activities section of the statement of cash flows is $4,700 (the selling price of $5,100 minus the loss of $400). When equipment is sold, the sale is reported in the investing activities section of the statement of cash flows. The selling price of the equipment is the amount received from the sale, which in this case is $5,100. However, since the equipment had accumulated depreciation of $4,200, the company had already accounted for this depreciation on its income statement and balance sheet, and so the loss on the sale of the equipment is calculated as the difference between the original cost and the selling price, which is $5,100 - $4,700 = $400. Therefore, the net cash inflow from the sale of the equipment that would be reported in the investing activities section of the statement of cash flows is $4,700.