An analysis of the general ledger accounts indicates that delivery equipment, wh

Question

An analysis of the general ledger accounts indicates that delivery equipment, which cost $200,000 and on which accumulated depreciation totaled $60,000 on the date of sale, was sold for $132,500 during the year.

Using this information, indicate the items to be reported on the statement of cash flows.

Transaction Section of Statement of Cash Flows Added or Deducted $200,000 cost of office equipment $60000 accumulated depreciation $132,500 sales price $7,500 loss on sale of equipment
(assume the indirect method is used)

Explanation / Answer

Transaction Section of statement of cash flows Added or deducted $200,000 cost of office equipment purchase of assets will be an investment activity this is cash payment. So it will deduct $60,000 Accumulated depreciation Accumulated depreciation will not show in cash flow statement. Depreciation expense will add back to net income under operating activity section $132,500 sale price Entire cash received from sale will show under investing activity This is cash receipt. So it will added $7,500 loss on sale of equipment Loss on sale of equipment will add back to net income under operating activities Added to net income

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