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Un Company sold office equipment with a cost of $41,280 and accumulated depreciation of $37,530 for $5,390. Required a. What

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Solution a. Calculation of Book Value of the asset at the time of sale :-

Cost of Office Equipment = $ 41280

Less :Accumulate Depreciation = $ 37530

Book Value of the Asset = $ 3750

b. Calculation of Amount of gain or loss on disposal :-

Sale Value of Office Equipment = $ 5390

Less :Book Value of the Asset = $ 3750

Gain on sale of Office Equipment    = $ 1640

c.   Sale Effect on Net Income :-

Net Income Will Increase by $ 1640 due to sale of Office Equipment.

d.   Sale Effect on Total Assets on the Balance Sheet :-

Total Assets Will Decrease by the amount of Book Value  $ 3750 due to sale of Office Equipment.

e. Effect on Cash Flow Statement :-

Cash Flow from Operating Activities = Decrease by the amount of Gain on the disposal of Office Equipment i.e $ 1640

Cash Flow from Investing Activities = Increase by the amount of sale value of Office Equipment i.e $ 5390

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