Chapter 7, Problem 7.75AP

(Learning Objectives 4, 8: Analyze the effect of a plant asset disposal and the cash flow impact of long-lived asset transactions) Parker Corporation reported the following related to property and equipment (all in millions):

From the balance sheets·

	12/31/2018	12131/2017
Property and equipment	$27,490	$25,670
Accumulated depreciation	(18,770)	(17,530)

From the investing activities section of the 2018 cash flow statement

Cash used to purchase property and equipment	($2,640
Proceeds from sale of property and equipment	50

From the 2018 income statement

Depreciation expense	$1,690
Gain or loss on the sale of equipment	??

Requirements

1. 1. Draw T-accounts for Property and Equipment and Accumulated Depreciation. Enter the information as presented and solve for the unknown in each account. (Hint Recall the types of transactions that make each of the two accounts increase and decrease. You are solving for the cost of Property and Equipment sold and the Accumulated Depreciation on those assets.)
2. 2. Based on your calculations in requirement 1, calculate the book value of assets sold during 2018. What is the difference between the sales price and the book value?
3. 3. Prepare the journal entry for the sale of property and equipment during 2018. Describe the effect of this transaction on the financial statements. Compare the sales price and the book value in the journal entry, and compare this to the difference you calculated in requirement 2. Describe briefly.
4. 4. Prepare a T-account for Property and Equipment, Net. Repeat requirement 1.