A plant asset with a cost of $40,000 and accumulated depreciation of $36,000 is sold for $6,000. Required a. What is the book value of the asset at the time of sale? b. What is the amount of gain or loss on the disposal? c. How would the sale affect net income (increase, decrease, no effect) and by how much? d. How would the sale affect the amount of total assets shown on the balance sheet (increase, decrease no effect) and by how much?

A plant asset with a cost of $40,000 and accumulated depreciation of $36,000 is sold for $6,000. Required a. What is the book value of the asset at the time of sale? b. What is the amount of gain or loss on the disposal? c. How would the sale affect net income (increase, decrease, no effect) and by how much? d. How would the sale affect the amount of total assets shown on the balance sheet (increase, decrease no effect) and by how much?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Similar questions

Trinkle Company made several purchases of long-term assets during the year. The details of each purchase are presented here. New Office Equipment 1. List price: $42,600; terms: 2/10, n/30; paid within the discount period. 2. Transportation-in: $880. 3. Installation: $400. 4. Cost to repair damage during unloading: $630. 5. Routine maintenance cost after eight months: $150. Basket Purchase of Copier, Computer, and Scanner for $52,500 with Fair Market Values 1. Copier, $23,421. 2. Computer, $12,027. 3. Scanner, $27,852. Land for New Warehouse with an Old Building Torn Down 1. Purchase price, $83,800. 2. Demolition of building, $4,760. 3. Lumber sold from old building, $1,780. 4. Grading in preparation for new building, $7,900. 5. Construction of new building, $279,000.
In determining the value in use, which of the following cash flow is excluded from the computation? I. Income tax receipts or payments. II. Net cash flows received or paid on the disposal of the asset at the end of its useful life in an arm's length transaction which is after using the asset. III. Future costs of improving or enhancing the asset's performance.
Fair value as a method of asset measurement is defined as: Multiple Choice O O the cost of an asset adjusted for the depreciation or amortization accumulated over its lifetime. price that would be received to sell assets in an orderly transaction between market participants on a given date. the net amount of cash into which an asset could be converted in the ordinary course of business. the value of what is given in exchange for the asset at its initial acquisition.
Exercises E9.1 (LO 1), AP Writing The following expenditures relating to plant assets were made by Glenn Company during the first 2 months of 2022. Determine cost of plant acquisitions. 1. Paid $7,000 of accrued taxes at the time the plant site was acquired. 2. Paid $200 insurance to cover a possible accident loss on new factory machinery while the machinery was in transit. 3. Paid $850 sales taxes on a new delivery truck. 4. Paid $21,000 for parking lots and driveways on the new plant site. 5. Paid $250 to have the company name and slogan painted on the new delivery truck. 6. Paid $8,000 for installation of new factory machinery. 7. Paid $900 for a 2-year accident insurance policy on the new delivery truck. 8. Paid $75 motor vehicle license fee on the new truck.
Allocating the cost of a natural resource to the units removed is called amortization. True False 2.Costs incurred to acquire long-lived assets are capital expenditures. True False 3.Accumulated depreciation, as used in accounting, may be defined as: o An expense of doing business. o Funds (or cash) set aside to replace the asset being depreciated. o portion of the cost of plant asset recognized as expense since asset was acquired. o Earnings retained in the business.4. On January 1, 1999, Ubot Inc. purchased a piece of equipment for $60,000. It is estimated to have an economic life of 5 years and a salvage value of $10,000. The 200% declining-balance method for depreciation is used. What is the book value of the asset at the end of year 2000 ? A. o $24,000 B. o $40,000 C. o $36,000 D. o $21,600 5.It is not necessary to disclose the maturity dates of long-term obligations on the financial statements. True False 6.The…
One of the main differences between U.S. GAAP and IAS/IFRS is the measurement of property, plant & equipment subsequent to initial recognition. Read IAS 16 and answer the following questions. Provide a list of the references you have used to search this topic. 1) What are the accounting models accepted under IFRS for the measurement of property, plant & equipment subsequent to initial recognition? 2) How often should the company revalue its property, plant & equipment under the revaluation model? 3) How should the revaluation gains and losses be accounted for and reported in the financial statements? 4) How should any claim for compensation from third parties for impairment be accounted for? 5) How should the recoverability of the carrying amount of property, plant & equipment be accounted for?
Answer the following questions: Required: a-1. Find the discussion of Property, Plant, and Equipment and depreciation methods used by Campbell's. Use data from the Campbell Soup Company annual report O Straight-line method O Double declining method O Written down value method a-2. Why the particular method is used for the purpose described. Straight-line depreciation is used for financial reporting purposes because depreciation expense will be lower than under any of the accelerated depreciation methods. O Straight-line depreciation is used for financial reporting purposes because depreciation expense will be higher than under any of the accelerated depreciation methods. a-3. What method do you think the company uses for income tax purposes? O Accelerated depreciation using the MACRS rates is probably used for tax purposes to minimize taxes payable. O Straight line Method using the MACRS rates is probably used for tax purposes to minimize taxes payable. Written down value Method using…
Property, plant and equipment (fixed assets) assets are depreciated because: a. The accrual basis of accounting requires matching of costs to revenues. b. Cash basis of accounting requires depreciation. c. The book values equal market values. d. The replacement cost of plant assets may fluctuate over time.
As a result of the transaction, what is the effect on the profit or loss? what is the cost of the new asset acquired? with computations
Which one of the following statements regarding the book value of an asset is correct? Multiple Choice О It reflects the original cost of the asset less accumulated depreciation. O It is the original cost at which the asset was purchased. It is the original cost of the asset minus the depreciation expense for that asset during the year. O It is the fair value of the asset if the asset is sold.
The cost of an item of property, plant and equipment includes all of the following: I. Purchase Price II. Directly attributable costs such as freight and taxes paid. III. Costs of dismantling and removing the item at the end of its useful life. IV. Costs of restoring the site on which the item is located at the end of its useful life. options: A) I and II only; B) I, II, III and IV C) I, II, and III only D) I and III only;
An asset group is being evaluated for an impairment loss. The following financial information is available for the asset group: Carrying Value=100,000,000 Sum of the undiscounted cash flows= 95,000,000 Fair value= 80,000,000 Carrying Value= $100,000,000 What is the value of the impairment loss?