Blue Co. sold plant assets costing $15,000 with accumulated depreciation of $10,000 for $7,000. As a result, Blue Co will report _____ on th

Blue Co. sold plant assets costing $15,000 with accumulated depreciation of $10,000 for $7,000. As a result, Blue Co will report _____ on the statement of cash flows in the cash flows from investing activities section.

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  1. Answer:

    Blue Co will report a loss of $18,000 on the statement of cash flows in the cash flows from investing activities section.

    Explanation:

    Step 1: Determine the total cost of the asset

    The total cost can be expressed as;

    T=A+D

    where;

    T=total cost of the asset

    A=asset purchase cost

    D=accumulated depreciation

    In our case;

    T=unknown

    A=$15,000

    D=$10,000

    replacing;

    T=15,000+10,000=$25,000

    Total cost of the asset=$25,000

    Step 2: Determine the cash flow after the sale

    This can be expressed as;

    Cash flow=selling price-total cost of the asset

    where;

    selling price=$7,000

    total cost of the asset=$25,000

    replacing;

    Cash flow=7,000-25,000=-$18,000

    Blue Co will report a loss of $18,000 on the statement of cash flows in the cash flows from investing activities section.

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  2. Answer:

    an increase of $7,000 in the investing activities section

    Explanation:

    The book value of the assets is $5,000 (its cost minus accumulated depreciation of 15000-10000).

    If the book value is $5,000 and it sells the assets at $7,000, it thus registered a gain of$2,000 (7000-5000)

    They recognized a gain of $2,000. $7,000 – ($15,000 – $10,000) = $2,000. The gain will be subtracted from net income in the Operating Activities section. The receipt of cash of $7,000 will be reported as an increase in the Investing Activities section.

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