Question

. On its January 1, 2016, balance sheet, Calvin Company reported equipment of $60,000 and accumulated...

. On its January 1, 2016, balance sheet, Calvin Company reported equipment of $60,000 and

accumulated depreciation of $20,000. During 2016, Calvin sold equipment with an original cost

of $5,000. Selected information from Calvin's 2016 statement of cash flows follows:

Net income                                                                    $20,000

Depreciation expense on equipment                      2,000

Gain on sale of equipment                                         600

Proceeds from sale of equipment                            1,500

Purchase of equipment                                               18,000

Required: Compute the amount of equipment and accumulated depreciation that should appear on Calvin's December 31, 2016, balance sheet.

ANSWER:  

Business   Accounting   
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Answer #1

book value of assets sold = gain on sale+cash from sale of equipment = 600+1500 = $2100

Accumulated depreciation om assets sold = orginal cost-book value = 5000-2100= $2900

Amount of equipment on December 31, 2016, balance sheet = Beginning balance + purchase - sale

= $60000+18000-5000

= $73000

Amount of accumulated depreciation on December 31, 2016, balance sheet = Beginning balance + depreciation expense - depreciation on assets sold

= 20000+2000-2900

= $19100

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