Information for 2 years is presented below for this company that uses the straight-line depreciation method. Current Year Prior Year Property, plant, and equipment Accumulated depreciation Depreciation expense Net sales Total assets $ 250,000 100,000 62,500 1,000,000 625,000 $190,000 85,000 47,500 900,000 475,000 During the current year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occur during the period? a. The equipment sold had not been reported with the company's property, plant and equipment. b. The company purchased additional equipment during the year. c. The company did not purchase additional equipment during the year.
Information for 2 years is presented below for this company that uses the straight-line depreciation method. Current Year Prior Year Property, plant, and equipment Accumulated depreciation Depreciation expense Net sales Total assets $ 250,000 100,000 62,500 1,000,000 625,000 $190,000 85,000 47,500 900,000 475,000 During the current year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occur during the period? a. The equipment sold had not been reported with the company's property, plant and equipment. b. The company purchased additional equipment during the year. c. The company did not purchase additional equipment during the year.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Information for 2 years is presented below for this company that uses the straight-line depreciation method.
Current Year Prior Year
Property, plant, and equipment
Accumulated depreciation
Depreciation expense
Net sales
Total assets
b.
C.
$ 250,000
d.
100,000
62,500
During the current year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occurred
during the period?
a. The equipment sold had not been reported with the company's property, plant and equipment.
The company purchased additional equipment during the year.
The company did not purchase additional equipment during the year.
The selling price of the equipment sold was reported with net sales.
1,000,000
625,000
$190,000
85,000
47,500
900,000
475,000
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