The following data are from a company\'s Automobile and the Accumulated Deprecia
ID: 2472630 • Letter: T
Question
The following data are from a company's Automobile and the Accumulated Depreciation—Automobile accounts:
Date Automobile Debit Credit Balance
Jan. 1 Balance brought forward 16,000
July 1 Traded for new auto 16,000 -0-
New auto 31,000
Accumulated depreciation - Automobile
Jan. 1 Balance brought forward 12,000
July 1 One-half year's depreciation 2,000 14,000
Auto traded 14,000 -0-
Dec. 31 One-half year's depreciation 4,000 4,000
The old auto was traded for a new one, with the difference in values paid in cash. The income statement for the year shows a loss on the exchange of autos of USD 1,200.
Indicate the dollar amounts, the descriptions of these amounts, and their exact locations in a statement of cash flows—indirect method.
Explanation / Answer
Cash flow from operating activities :-
a) Depreciation to be added = $ 2000 + $ 4000 = $ 6000
b) loss on sale of Fixed Asset = $ 1200
Cash flow from investing activities :-
a) Sale of Fixed Asset (old auto) $ 800
(16000-14000-1200)
b) Purchase of Fixed Asset ($ 31000)
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