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29 May, 08:38

Office equipment with accumulated depreciation of $110,000 is sold for cash, resulting in a loss of $25,000. If this office equipment originally had a cost of $200,000, the amount of cash inflow reported in the statement of cash flows relative to the sale is Select one: a. $ 65,000. b. $135,000. c. $ 25,000. d. $ 85,000. e. $175,000.

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  1. 29 May, 10:12
    0
    Correct answer is a) $65000

    Explanation:

    Original Cost=200000

    Less: Accumulated dep = -110000

    Book value=90000

    Less: Loss on sale of equipment=-25000

    Cash receive from sale of equipment=65000
  2. 29 May, 11:24
    0
    a. $ 65,000

    Explanation:

    The cost of the asset less the accumulated depreciation gives the net book value.

    When an asset is disposed at a price lower than the net book value, the company makes a loss on disposal and where the the net book value is lower than the sales proceeds, the company makes a gain on disposal.

    Net book value = $200,000 - $110,000

    = $90,000

    If the company made a loss of $25,000 on disposal,

    the sales proceed = $90,000 - $25,000

    = $65,000

    This is the amount that will be presented in the statement of cash flow as an inflow in the investing section.
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