Question

During the current year, Parsley Company sold equipment with an original cost of $100,000 and accumulated depreciation of $70,000. The income statement reveals a gain of $20,000 relating to this disposal. Cash received from the sale of the equipment is?

Answer 1

The cash received from the sale of Parsley Company's equipment was $50,000, which was determined by adding the gain of $20,000 to the book value of the equipment ($30,000) at the time of sale.

Step-by-step explanation:

The student's question pertains to the cash received from the sale of equipment by Parsley Company. Given that the original cost of the equipment was $100,000 and it had accumulated depreciation of $70,000, the book value of the equipment at the time of sale was $30,000.

Seeing as there was a gain of $20,000 reported on the income statement, we can infer that the sale price of the equipment must have been $50,000. This is because the gain is calculated as the sale price minus the book value. Therefore, the cash received from the sale was $50,000.