If an analysis of the general ledger accounts indicates that equipment, which had cost $168,000 and on which accumulated depreciation totaled $135,000 on the October 1st was sold for $20,000. During 2009 the depreciation on the equipment was $30,000.
How will the above items be shown (operating, financing, investing) on the statement of cash flows and are they added or subtracting in the statement of cash flows?
Solution
1) $30,000 will be added to Cash flow from operating activities because of the current year depreciation amount. As depreciation is a non-cash charge we will add it back to net income.
2) $20,000 will be added to Cash flows from investing activities as it generated cash inflows from the sale of the equipment.
3) $17,000 will be deducted from Cash flow from operating activities on account of gain from sale of equipment. Gain on sale of equipment = Cost of equipment
.
Z Score,T Score, Percential Rank and Box Plot Graph
If an analysis of the general ledger accounts indicates that equipment.docx
1. If an analysis of the general ledger accounts indicates that equipment, which had cost $168,000
and on which accumulated depreciation totaled $135,000 on the October 1st was sold for
$20,000. During 2009 the depreciation on the equipment was $30,000.
How will the above items be shown (operating, financing, investing) on the statement of cash
flows and are they added or subtracting in the statement of cash flows?
Solution
1) $30,000 will be added to Cash flow from operating activities because of the current year
depreciation amount. As depreciation is a non-cash charge we will add it back to net income.
2) $20,000 will be added to Cash flows from investing activities as it generated cash inflows
from the sale of the equipment.
3) $17,000 will be deducted from Cash flow from operating activities on account of gain from
sale of equipment. Gain on sale of equipment = Cost of equipment
