Question

Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. At December 31 Year 2 Year 1 Equipment $ 600,000 $ 750,000 Accumulated Depreciation-Equipment 428,000 500,000

Answer 1

Mercury Company

Sale of Equipment account:

Equipment $150,000

Acc. Depreciation 112,000

Book value $38,000

Cash received $38,000

Step-by-step explanation:

a) Data and Calculations:

Equipment Account:

Beginning balance $750,000

Ending balance 600,000

Sale of equipment $150,000

Accumulated Depreciation - Equipment account:

Beginning balance $500,000

Depreciation expense 40,000

Ending balance 428,000

Sale of Equipment $112,000

b) The Cash received from the sale of Mercury Company's equipment is equal to the book value in Year 2 according to the question. Since the book value (value after accumulated depreciation) is $38,000, that means that the equipment was sold at $38,000 recording no profit or loss for the company on the sale.