Answered: Burg Company’s beginning balance in its…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Burg Company’s beginning balance in its Property, Plant, and Equipment (PP&E) account was $700,000 on January 1, 2017. The PP&E account had an ending balance of $1,000,000 on December 31, 2017. Accumulated Depreciation on the equipment had a beginning balance of $300,000 and an ending balance of $420,000. Depreciation expense during 2017 was $200,000. Strasburg sold PP&E with a net value of $50,000 during 2017, and reported a gain on the sale of $14,000.

How much cash did Strasburg receive from the sale of PP&E?

How much cash did Strasburg pay to purchase new PP&E?

Expert Solution

Step 1

To determined the cash on purchase and sale of PP&E, we need to prepare PP&E and Accumulated depreciation ledger account.

Property, Plant & Equipement account
Particular	Debit($)	Particular	Credit($)
To Balance b/d	700000
To Cash a/c (purchase) (bal. fig.)	270000	By Cash a/c (sale)	64000
To Profit & loss a/c	14000	By Accumulated Depreciation a/c	80000
		By balance c/d	1000000