Question

Blue Company sold equipment that cost $96000 and had a book value of $45000 for $76000. If Blue uses a worksheet to help prepare its Statement of Cash Flows, what would be entered in the bottom portion of the reconciling columns?

a $25000 credit and $76000 debit
b $31000 debit and $96000 credit
c $31000 credit and $76000 debit
d $25000 credit and $96000 debit

Answer 1

The correct reconciling entries on the worksheet for the Statement of Cash Flows after Blue Company sold the equipment are a $31000 credit (gain on sale) and a $96000 debit (removal of equipment cost).

Step-by-step explanation:

The question pertains to accounting and specifically the preparation of a Statement of Cash Flows, requiring the determination of the correct entries for a piece of equipment sold by Blue Company. The equipment had a cost of $96000, a book value of $45000, and was sold for $76000. When preparing a worksheet for the Statement of Cash Flows, one would reconcile this transaction by recognizing the gain on the sale of the equipment and removing the equipment's cost from the books. The correct entry to reconcile the gain would be a $31000 credit (which is the difference between the sale price of $76000 and the book value of $45000) and a $96000 debit, which correlates with option b.