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Loss / gain on disposal of fixed assets, cash flow statement

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23. A fixed asset with a cost of $30,000 and accumulated depreciation of $27,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset?
$2,500 loss
$1,000 loss
$2,500 gain
$1,000 gain

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21. Equipment with a cost of $80,000, an estimated residual value of $5,000, and an estimated life of 15 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the useful life should be shortened by 5 years and the residual value changed to zero. The depreciation expense for the current and future years is _______. (Points: 4)
Answer: $11,000

Initial depreciation = (80000-5000)/15=5000
Accumulated depreciation=5000*5=25000
Net book value of equipment at the end of 5 years = 80000-25000=55000
Life remaining = 15-5-5=5 years
Depreciation for current and future years = 55000/5=11000

23. A fixed asset with a cost of $30,000 and accumulated depreciation of $27,500 is sold for $3,500. What is the amount of the gain or loss on disposal of the fixed asset? (Points: 4)
Answer: $1,000 gain
Gain =3500-30000+27500=$1000
The book value of the asset is $2500, it is sold for $3500. Hence there is a gain of $1000.

24. On December 31, Reach It Batting Cages Company has decided to discard one of its batting cages. ...

Solution Summary

Answers five conceptual questions on accounting. The concepts discussed are depreciation accounting, loss / gain on sale of fixed assets and calculating the cash flow from operations.

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