Financial Accounting, 8th Edition
Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
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Chapter 12, Problem 12E

(Chapter Supplement B) Computing and Reporting Cash Flow Effects of Sale of Plant and Equipment

During two recent years Perez Construction, Inc., disposed of the following plant and equipment:

Year 1 Year 2
Plant and equipment (at cost) $ 75,000 $13,500
Accumulated depreciation on equipment disposed of 40,385 3,773
Cash received 17,864 12,163
Gain (loss) on sale (16,751) 2,436

Required:

  1. 1. Determine the cash flow from the sale of property for each year that would be reported in the investing activities section of the cash flow statement.
  2. 2. Perez uses the indirect method for the operating activities section of the cash flow statement. What amounts related to the sales would be added or subtracted in the computation of Net Cash Flows from Operating Activities for each year?
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Acorn Construction (calendar-year-end C corporation) has had rapid expansion during the last half of the current year due to the housing market's recovery. The company has record income and would like to maximize its cost recovery deduction for the current year. (Use MACRS Table 1, Table 2, Table 3, Table 4, and Table 5.) Note: Round your answer to the nearest whole dollar amount. Acorn provided you with the following information: Asset Placed in Service Basis New equipment and tools August 20 $ 3,800,000 Used light-duty trucks October 17 2,000,000 Used machinery November 6 1,525,000 Total   $ 7,325,000 The used assets had been contributed to the business by its owner in a tax-deferred transaction two years ago. a. What is Acorn's maximum cost recovery deduction in the current year?

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Financial Accounting, 8th Edition

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