Question

Problem 2 The Snook Corporation's financial data for the year ended December 31, 20x5 includes the following: 20x5 20x4 Land $400,000 2,770,000 320,000 1,660,000 805,000 $450,000 2,870,000 670,000 1,580,000 780,000 Buildings Accumulated depreciation - buildings Equipment Accumulated depreciation - equipment Depreciation expense - building Depreciation expense - equipment Gain on sale of land Gain on sale of building Loss on exchange of equipment $130,000 145,000 50,000 65,000 ? Additional Information The cost of the land sold was $240,000. There were two land acquisitions made during the year: a parcel of land was acquired for cash land was acquired by exchange of equipment. The equipment exchanged had an original cost of $190,000, accumulated depreciation of $120,000 and a fair value of $60,000. The land acquired had a fair value of $65,000. A new building was acquired at a cost of $500,000. A mortgage of $350,000 was taken out to finance the building. 1. 2. 3. Required- What is the loss on exchange of equipment? Prepare the Cash Flow from Investing section of the Statement of Cash Flow. a) b)

Answer 1

(a) Loss on Exchange of equipment= $5,000
(b) Cash Flow from Investing Activities
	Payment for Purchase of Equipment				$                             (270,000)
	Payment for Purchase of Building				$                             (500,000)
	Proceeds from sale of building				$                               185,000
	Payment for Purchase of Land				$                             (125,000)
	Proceeds from sale of Land				$                               290,000
	Cash Outflow from Investing Activities				$                             (420,000)
Equipment A/c
To Balance b/d		$        1,580,000		By land A/c		$        65,000
				By Accumulated Depreciation A/c		$     120,000
				By Loss on Echange A/c		$          5,000
To Bank A/c		$            270,000
(Purchase- Balancing Figure)				By Balance c/d		$ 1,660,000
		$        1,850,000				$ 1,850,000
Accumulated Depreciation -Equipment A/c
				By Balance b/d		$     780,000
To Equipment A/c		$            120,000
				By Depreciation expense A/c		$     145,000
To Balance c/d		$            805,000
		$            925,000				$     925,000
Accumulated Depreciation - Building A/c
				By Balance b/d		$     670,000
To Building A/c		$            480,000
(Balancing Figure)				By Depreciation expense A/c		$     130,000
To Balance c/d		$            320,000
		$            800,000				$     800,000
Building A/c
To Balance b/d		$        2,870,000		By Bank A/c(sale)		$     185,000
				(Balancing Figure)
To Gain on sale of building A/c		$              65,000
To Bank A/c		$            500,000		By Accumulated Depreciation		$     480,000
(Purchase- Partially Financed)				By Balance c/d		$ 2,770,000
		$        3,435,000				$ 3,435,000
Land A/c
To Balance b/d		$            450,000		By Bank A/c(sale)		$     290,000
To Bank A/c		$            125,000		(240000+50000)
(Balancing Figure)
To Gain on sale of Land A/c		$              50,000
To Equipment A/c		$              65,000
(Exchange)				By Balance c/d		$     400,000
		$            690,000				$     690,000