about the cash flow problem, confusing. 1MQ83%QuestionQuestion: assume a company's beginning and ending balances in its property,plant and equipment account are 1000$ and 1800$ respectively. In addition,during the period of company sold a piece of equipment for $40 cash thatoriginally cost $100 and had accumulated depreciation of $70. the companyrecorded a gain on the sale of 10, which had been included in net income.Equation beginning balance+ debits-credits- ending balance1000+debits-100-1800 debits=900 So why the credit here is 100, the originalcost $100? Debit can be $70? why not 70? confused!!!ĢProperty, Plant,When a company purchasesequipment it debits the Property, Plant, and Equipment account for thechase. When it sells or disposes of these kinds of assets, it credit:Equipment account for the original cost of the asset. To computeto Property, Plant, and Equipment we use the basic equation for aMAYBasic Equation for Asset AccountsBeginning balance + Debits - Credits = EndingFor example, assume a company's beginning and ending tPlant and Faninment account. are $1.000 and $1.800 respectivelprocasWOLingasse nganceestingProperty, Plant, and Equipment When a company purchases property, plant, orequipment it debits the Property, Plant, and Equipment account for the amount of the pur-chase. When it sells or disposes of these kinds of assets, it credits the Property, Plant, andEquipment account for the original cost of the asset. To compute the cash outflows relatedto Property, Plant, and Equipment we use the basic equation for assets mentioned earlier:Basic Equation for Asset AccountsBeginning balance + Debits - Credits - Ending balance=For example, assume a company's beginning and ending balances in its Property,Plant, and Equipment account are $1,000 and $1,800, respectively. In addition, during theperiod the company sold a piece of equipment for $40 cash that originally cost $100 andhad accumulated depreciation of $70. The company recorded a gain on the sale of $10,which had been included in net income.We start by calculating the $800 increase in the Property, Plant, and Equipmentaccount. This increase signals the need to subtract cash outflows in the investing activi-ties section of the statement of cash flows. In fact, it may be tempting to conclude that theNoncurrent Assets (Investing activities)Property, plant, and equipmentLong-term investmentsLoans to other entitiesLiabilities and Stockholders' Equity(Financing activities)Increase inAccountBalanceBonds payableCommon stockRetained earnings*Requires further analysis to quantify cash dividends paid.SubtractSubtractSubtractAddAddDecrease inAccountBalanceAddAddAddSubtractSubtract

Gross amount refers to the Original Cost incurred while purchasing an Asset In the given example…

For example, assume a company's beginning and ending balances in its Property, Plant, and Equipment account are $1,000 and $1,800, respectively. In addition, during the period the company sold a piece of equipment for $40 cash that originally cost $100 and had accumulated depreciation of $70. The company recorded a gain on the sale of $10, which had been included in net income. We start by calculating the $800 increase in the Property, Plant, and Equipment account. This increase signals the need to subtract cash outflows in the investing activi- ties section of the statement of cash flows. In fact, it may be tempting to conclude that the

For example, assume a company's beginning and ending balances in its Property, Plant, and Equipment account are $1,000 and $1,800, respectively. In addition, during the period the company sold a piece of equipment for $40 cash that originally cost $100 and had accumulated depreciation of $70. The company recorded a gain on the sale of $10, which had been included in net income. We start by calculating the $800 increase in the Property, Plant, and Equipment account. This increase signals the need to subtract cash outflows in the investing activi- ties section of the statement of cash flows. In fact, it may be tempting to conclude that the

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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