Question

During the period, Sanchez Company sold some excess equipment at a loss. The following information was collected from the company’s accounting records:

During the period, Sanchez Company sald some excess equipment at a loSs The following infomation was collected from the company's accounting records From the Income Statcmcnt Deprecistion expense Lo88 on 8sle of equipment From the Balanca Shaet Baginning equipment Ending equipmeri Beginning accumulated depreciation Ending accumulatad dapraclation 5 920 20.400 11.300 1,870 1,730 No new equpment was bought during the penod. Required: 1. For the oquipment that was sold, determine its ongnal cost, its accumulaied deprecia en, and the casth roceived frem thc sale. (Usc the cquipment and aocurmulated deprecation T-accounts to inter the book value at the oquipment scld.) Cost of equipement sokd Accumulated depreclation on sold equpmant Csh received frorn sale 2. Sanchez Company uses the Indirect method for the Operating Activities section of the cash fow statement. ha: amount related to the sale would be sdded or subtracted in the com putation of Net Cash Flows trom Operatng Actties? (Input the amount as positive value.)

Answer 1

Solution 1:

Cost of Equipment sold = Beginning Equipment - Ending Equipment = $20400 - $11300 = $9,100

Accumulated Depreciation on sold Equipment = Beginning Accumulated Depreciation+ Depreciation expense -Ending Accumulated Depreciation = $1870 + $920 - $1730 = $1,060

Cash Received from sale = Cost of Equipment sold - Accumulated Depreciation on sold Equipment - Loss on sale

= $9100 - $1060 - $2900 = $5,140

Solution 2:

The loss on sale of $2,900 would be added in the computation of Net cash flows from operating activities.

Solution 3:

The cash received from sale of $5,140 would be added in the computation of Net cash flows from investing activities.