Question

Assume we know the depreciation expense, $25,000 (from income statement) and Loss on Sale of Plant...

Assume we know the depreciation expense, $25,000 (from income statement) and Loss on Sale of Plant Asset, $4,000. We also know the company purchased plant assets with cash in the amount of $45,000. When preparing the Investing section, we do not know the cash received from the sale of plant assets, but we can calculate it using the information provided. The comparative Balance Sheets indicate Net Plant Assets were $345,000 at the beginning of the year and $360,000 at the end of the year. Use the T account below to answer the following questions. Note – The labels for each item are on the left but this DOES NOT mean the item will be on the left side (debit) of the T account.

                Net Plant Assets

Begin Bal  

Depreciation

Net Value of Equip Sold

Equip purchased

Ending Bal

Include the beginning and ending balance on the correct side of the T-account.

Include the Depreciation Expense on the correct side of the T account. Refer to JEs and T accounts above if you are unsure.

Show the purchase of Equipment appropriately in the T account above.

Solve for the “gray box”. This represents the Net Book Value of Plant Assets sold.

Use the journal entry that records the sale of these assets. Fill in the amounts for Loss on Sale (from Income Statement and provided above) and the Net Plant Asset amount solved for in the T account. Calculate the debit to Cash such that total debits equal total credits for the journal entry.

                        dr. Cash                                               _____________

                        dr. Loss on sale                                   _____________

                                    cr. Net Plant Assets                            _______________

Complete the Investing activity section of the Statement of Cash Flows.

Investing activity:

Cash paid for purchase of Plant Assets______________

Cash received from sale of Plant Assets______________

Net Cash used for Investing Activities$_____________             

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