Asked by Brooke Ramsey on May 06, 2024
Verified
At January 1 2016 Benny Enterprises reported a balance in the Equipment account of $45000. During the year the company purchased equipment with a cost of $60000 and sold equipment with a book value of $30000. The company reported a loss on the sale of equipment of $4000. Assume the indirect method is used.
Instructions
Determine what amount will be reported in (a) the operating activities section and (b) the investing activities section with regard to the purchase and sale of equipment.
Operating Activities
The primary revenue-generating activities of a business, including the production, sales, and delivery of the company's products and services.
Investing Activities
Part of a company's cash flow statement that shows the cash spent on investments in capital assets and any cash received from the sale of those assets.
Equipment Account
A ledger account that tracks the purchase price, depreciation, and disposal of tangible assets such as machinery and equipment used in business operations.
- Discern the distinctions among operating, investing, and financing functions.
- Recognize the impact of specific transactions on the cash flows of a company.
- Identify the net cash inflows and outflows from financing and investing operations.
Verified Answer
b. Proceeds from the Sale of Equipment $26000 ($30000 - $4000)
Purchase of Equipment $60000
Learning Objectives
- Discern the distinctions among operating, investing, and financing functions.
- Recognize the impact of specific transactions on the cash flows of a company.
- Identify the net cash inflows and outflows from financing and investing operations.
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