Question

Phosphoric Company reported capital assets, net of accumulated depreciation, on January 1, 2017, at $645,000 and $732,500 on December 31, 2017. The income statement showed depreciation of $48,300 and a $5,600 loss on sale of capital assets. Phosphoric Company acquired $213,000 of capital assets during the year. The proceeds from the sale of capital assets were:

a) $89,900
b) $77,200
c) $71,600
d) $125,500

Answer 1

The proceeds from the sale of Phosphoric Company's capital assets are calculated by analyzing changes in net capital assets, adjusting for depreciation, newly acquired assets, and loss on sale, resulting in proceeds of $77,200.

Step-by-step explanation:

The student has asked to calculate the proceeds from the sale of capital assets based on the provided information about a company's financial data. The company reported net capital assets of $645,000 at the beginning of the year and $732,500 at the end of the year, with an acquisition of capital assets worth $213,000 during the year, depreciation of $48,300, and a loss on sale of capital assets of $5,600. To find the proceeds from the sale of capital assets, we need to calculate the difference in net capital assets, add back depreciation, subtract capital assets acquired, and adjust for the loss on sale. The calculation is as follows:

• Difference in net capital assets = $732,500 - $645,000 = $87,500
• Add back depreciation to account for the change in net capital assets = $87,500 + $48,300 = $135,800
• Subtract capital assets acquired = $135,800 - $213,000 = -$77,200
• Adjust for the loss = -$77,200 - $5,600 = -$82,800
• Since the change is negative, this is the amount by which the disposed assets exceed the proceeds from sale, which means proceeds = asset sales - loss = -$82,800

Therefore, the proceeds from the sale of capital assets are $77,200 (Option b).