Question

Reporting changes in Equipment on Statement of Cash Flows An analysis of the general ledger accounts indicates that delivery equipment, which cost $200,000 and on which accumulated depreciation totaled $60,000 on the date of sale, was sold for $132,500 during the year. Using this information, indicate the items to be reported on the statement of cash flows.

Answer 1

The answer is stated below:

Step-by-step explanation:

Cash flow from the investing activities is the vital section of the cash flow statement of the company, as it displays how much amount of money has been used for making the investments during the particular period or year.

This activity comprise of the purchases of the long term assets like equipment, property and plant.

This item to be recorded as:

Cash flow from the investing activities

Cash received from the sale of equipment.................................$132,500

The loss on the sale of the asset (which amounts to $7,500 )will be added to the Net Income in order to determine the cash flow from operating activities.

Working Note:

Loss on Sale = (Cost of asset - Accumulated depreciation) - Sale value

= ($200,000 - $60,000) - $132,500

= $140,000 - - $132,500

= $7,500