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Ford Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold...

Ford Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Ford Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.

At December 31 Year 2 Year 1
Equipment $ 600,000 $ 750,000
Accumulated Depreciation-Equipment 428,000 500,000
Business   Accounting   
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Answer #1

Accumulated depreciation beginning = $500,000

Accumulated depreciation ending = $428,000

Depreciation expense = $40,000

Accumulated depreciation on equipment sold = Accumulated depreciation beginning + Depreciation expense - Accumulated depreciation ending

= 500,000+40000-428,000

= $112,000

Cost of equipment sold = $150,000

Book value of equipment = Cost of equipment sold - Accumulated depreciation on equipment sold

= 150,000-112,000

= $38,000

Since the equipment was sold at its book value, hence cash received from sale of equipment is $38,000

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