7) Sometimes the information we know is different. Assume Net Property Plant and

Question

7) Sometimes the information we know is different. Assume Net Property Plant and Equipment was $1,800,000 at the beginning of the year and was $1,650,000 at the end of the year. The Income Statement indicates that Depreciation Expense was $261,000 and we know plant assets were sold for $60,000 cash and a $12,000 Gain on sale of Plant Assets was reported on the Income Statement. We do not know the cash paid for purchases but we can calculate the amount. Use the T account below to assist in the calculation. Net Plant Assets Begin Bal Depreciation NBV sold Equip purchased Ending Bal a) Include the beginning and ending balances on the correct side of the T-account. b) Show the Depreciation Expense appropriately in the T account above. c) Calculate the Net Book Value of the assets sold appropriately in the T account such that the total debits equals total credits in the journal entry below. dr. Cash __ cr. Gain on sale ___ cr. Net Plant Assets _______________ d) Include the NBV of Plant Assets sold correctly in the T account above. e) Solve for the “gray shaded” box as purchases. f) Complete the Investing activity section of the Statement of Cash Flows. Remember to report only the “cash” flows. (The part of the journal entries that affect the account cash. Investing activity: Cash paid for purchase of Plant Assets ______________ Cash received from sale of Plant Assets ______________ Net Cash used for Investing Activities $_____________

Explanation / Answer

According to the question in a single T account we nedd to do this exercise Net Property Plant & Equipment a)Beg bal $1,800,000 b) Depreciation exp $261,000 e) Cash $159,000 d) NBV of asset sold 48000 (60000-12000) a)Ending Bal 1650000 c) entry is Cash $60,000 Gain on sale of plant $12,000 Net plant 48000 Beg bal+Cash-Dep-NBV=End bal 1800000+cash-261000-48000=1650000 Cash $159,000 e) Purchases of Asset=$159000 f) Cash flow from Investing activities : Cash paid for purchase of Plant Assets -159000 Cash received from sale of Plant Asset $60,000 Net Cash used for Investing Activities -99000

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