19) On January 1, 2011, Muddy Acres, Inc. purchased a $44,000 mulching machine with a useful life of 5 years and a $4,000 salvage value. The company uses straight-line depreciation. On December 31, 2014, after 4 full years of use, Muddy Acres sold the machine for $6,000.
Part A:
Show the effect of the sale in 2014 on the accounting equation. Write in both the correct dollar amounts and the account titles affected. Use a + for increases and parentheses () for decreases. Assume that depreciation expense for 2014 has already been recorded.
Assets
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Liabilities
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Shareholders’ equity
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CC
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Retained earnings
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Part B:
For each item below,
write in the amount
as of or for the period ended December 31, 2014, in the column of the one financial statement where the amount is found.
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Income Statement
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Statement of Cash Flows
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Balance Sheet
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1.Proceeds from sale of equipment
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2. Gain (loss) from sale of equipment
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3. Depreciation expense
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20)
Part A:
Record the effect of each of the following sales of long-term assets on the accounting equation. Write in
BOTH
the correct dollar amounts and the titles of the accounts involved.
Assets
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Liabilities
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Shareholders’ equity
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CC
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Retained earnings
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1. A $44,000 van was depreciated using straight-line and assuming a 10-year life and $5,000 salvage value. After 3 years, it was sold for $30,000 cash.
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2. A $44,000 van was depreciated
using double-declining balance and assuming a 10-year life and $5,000 salvage value. After 3 years it was sold for $30,000 cash.
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Part B:
Use your answer from
Part A, Sale 2
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to answer the following three questions:
_____ 1. The gain or loss from the sale of the van will appear on the ________.
a. Income Statementb. Statement of cash flowsc. Balance sheet
_____ 2. A gain from the sale of the van would ________.
a. increase Sales d. increase Net income
b. increase Gross profit e. All of these
c. increase Operating income
_____ 3. The sale of the van appears on the Statement of cash flows as ________.
a. $7,472 cash from operating activities
b. $30,000 cash from operating activities
c. $7,472 cash from investing activities.
d. $30,000 cash from investing activities
e. $7,472 cash from financing activities
f. $30,000 cash from financing activities