Question

Company X sold Equipment with a $150,000 cost and $40,000 of Accumulated Depreciation for $125,000. At the time of the sales, the company’s PPE account had a beginning and ending debit balances of $245,000 and $300,000 respectively. The company’s accumulated depreciation accounting and beginning and ending credit balances of $100,000 and $98,000 respectively.

1. How much was the gain or loss from the sale of the equipment.
2. How much PPE did Company X purchase during the year?
3. What was Company’s X’s Depreciation Expense for the year?
4. How much cash did Company X earn from selling PPE during the year?

Answer 1

Answer-a:

Sale price of equipment sold		$ 125,000
Less: Cost of machinery	$   150,000
(-) Accumulated depreciation	(40,000)	110,000
Gain on sale of equipment		15,000

Answer-b:

New PPE purchased during the year = $205,000

Answer-c:

Depreciation expenses for the year = $38,000

Answer-d:

Cash earned from selling PPE during the year = $125,000

Explanation for b, c & d:

Particulars Beg. Bal. New equip purchased 150,000 Equipment Particulars 245,000 Cost of equip sold 205,000 End. Bal. 450,000 Total 300,000 450,000 Total Accumulated depreciation Equipment Particulars Particulars Acc. Dep on equip sold 40,000 Beg. Bal. Dep. for the year End. Bal. 98,000 Total 138,000 Total 100,000 38,000 138,000