Question

Office equipment with accumulated depreciation of $110,000 is sold for cash, resulting in a loss of $25,000. If this office equipment originally had a cost of $200,000, the amount of cash inflow reported in the statement of cash flows relative to the sale is Select one: a. $ 65,000. b. $135,000. c. $ 25,000. d. $ 85,000. e. $175,000.

Answer 1

a. $ 65,000

Step-by-step explanation:

The cost of the asset less the accumulated depreciation gives the net book value.

When an asset is disposed at a price lower than the net book value, the company makes a loss on disposal and where the the net book value is lower than the sales proceeds, the company makes a gain on disposal.

Net book value = $200,000 - $110,000

= $90,000

If the company made a loss of $25,000 on disposal,

the sales proceed = $90,000 - $25,000

= $65,000

This is the amount that will be presented in the statement of cash flow as an inflow in the investing section.

Answer 2

Correct answer is a) $65000

Step-by-step explanation:

Original Cost=200000

Less: Accumulated dep =-110000

Book value=90000

Less: Loss on sale of equipment=-25000

Cash receive from sale of equipment=65000