Asked by Ryleigh Geddes on Jun 21, 2024
Verified
A business sold equipment for $8,000 in cash proceeds which had an original cost of $50,000 and accumulated depreciation at the date of sale of $40,000. Which of the statements below is true?
A) A loss of $2,000 was reported in the income statement and a cash inflow of $8,000 was reported in the cash flow statement.
B) A loss was not reported in the income statement but a cash inflow of $8,000 was reported in the cash flow statement.
C) A loss was not reported in the income statement but a cash inflow of $10,000 was reported in the cash flow statement.
D) A loss of $8,000 was reported in the income statement and a cash inflow of $13,000 was reported in the cash flow statement.
Accumulated Depreciation
The total depreciation expense charged against an asset since it was acquired, reflecting its loss in value over time.
Original Cost
The initial expenditure involved in acquiring an asset or launching a project.
Cash Proceeds
Cash proceeds are the total amount of cash received from transactions, sales, financing, or other business activities during a specific period.
- Discern the relationship between transactions and cash flow changes.
- Investigate the influence of depreciation expense on the financial statements and the flow of cash.
Verified Answer
BK
BENNY KIWELU.Jun 23, 2024
Final Answer :
A
Explanation :
The equipment's book value was $10,000 ($50,000 original cost - $40,000 accumulated depreciation). Selling it for $8,000 results in a $2,000 loss ($10,000 - $8,000). The cash inflow from the sale is correctly reported as $8,000.
Learning Objectives
- Discern the relationship between transactions and cash flow changes.
- Investigate the influence of depreciation expense on the financial statements and the flow of cash.