Question

Consider the following facts for Java Jolt:

a. Beginning and ending Retained Earnings are $47,000 and $72,000, respectively. Net income for the period is $64,000.
b. Beginning and ending Plant Assets are $122,500 and $128,500, respectively.
c. Beginning and ending Accumulated Depreciation-Plant Assets are $18,500 and $21,500, respectively.
d. Depreciation Expense for the period is $19,000 and acquisitions of new plant assets total $29,000. Plant assets were sold at a $3,000 gain. Requirements
What was the amount of the cash receipt from the sale of plant assets?
The cash receipt from the sale plant assets is $ ___.

Answer 1

To find out the cash receipt from the sale of plant assets for Java Jolt, calculate the change in plant assets, adjust for purchases and depreciation, and then add the gain on sale. After accounting for these, the cash receipt from the sale of plant assets is $5,000.

Step-by-step explanation:

To determine the cash receipt from the sale of plant assets for Java Jolt, we need to analyze the given information about the plant assets and depreciation. The gain on the sale of plant assets is reported as $3,000.

Here is the calculation for cash receipt on sale:

• Begin with the initial cost of plant assets at the beginning and at the end of the period to calculate the change in plant assets.
• Account for the purchase of new plant assets totaling $29,000, which increases the plant assets.
• Subtract the total depreciation expense, as this reflects the allocation of the cost of plant assets over their useful life, but it does not involve cash outflow.
• Add back the gain on sale of plant assets because it's included in the ending balance of plant assets but not part of the cash paid.

Using these steps:

• Change in Plant Assets = Ending Plant Assets - Beginning Plant Assets
• Change in Plant Assets = $128,500 - $122,500 = $6,000
• Change in Plant Assets ($6,000) - Purchases of new assets ($29,000) + Depreciation Expense ($19,000) = Cash Receipt - Gain on Sale
• $6,000 - $29,000 + $19,000 = Cash Receipt - $3,000
• Cash Receipt = $(-4,000) + $3,000
• Cash Receipt = $5,000

Therefore, Java Jolt received $5,000 from the sale of plant assets.