4. At January 1, 2014, Stitch Enterprises reported a balance in the Equipment ac

Question

4. At January 1, 2014, Stitch Enterprises reported a balance in the Equipment account of $45,000. During the year the company purchased equipment with a cost of $60,000 and sold equipment with a book value of $30,000. The company reported a loss on the sale of equipment of $4,000. Assume the indirect method is used. Instructions Determine what amount will be reported in (a) the operating activities section and (b) the investing activities section with regard to the purchase and sale of equipment. (Check Figure: Operating: Loss on sale of Equipment, $4,000. Investing: Proceeds from the Sale of Equipment, $26,000 and Purchase of Equipment, -$60,000)

Explanation / Answer

Operating activities:

a.These are the company's core business activities, such as manufacturing, distributing, marketing and selling a product or service. Operating activities should generally provide the majority of a company's cash flow and largely determine whether a company is profitable.

The only amount reported under the operating activities is loss on sale of asset = 4,000

Investing activities:

b.Cash flow from investing activities is an item on the cash flow statement that reports the aggregate change in a company's cash position resulting from any gains (or losses) from investments in the financial markets and operating subsidiaries and changes resulting from amounts spent on investments in capital assets

Purchases(60,000) and sale(26,000) of equipment’s are reported under the investing activities.

Related Questions

Navigate

• Browse (All)
• Browse 4
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.