Given:
beginning gross PP&E: $100
ending gross PP&E: $256
cost of gross PP&E purchased during the year: $237
beginning accumulated depreciation: $29
ending accumulated depreciation: $98
depreciation expense during the year: $124
proceeds from sale of PP&E during the year: $49
Question:
calculate the GAIN ON SALE OF PP&E during the year
Thanks!
| +166 | How to stop feeling like shit for not making it in IB? | 60 | 39m | |
| +120 | If Tik Tok is forced to sell, what banks do you think would be involved in the deal? | 59 | 4h | |
| +85 | Updated LA Banking Scene (2024) | 61 | 1h | |
| +39 | Ranking banks that went under | 24 | 12s | |
| +38 | Burnt Out M&A ASO | 20 | 1h | |
| +35 | Relevance of A-Levels for U.K. London recruiting | 24 | 6h | |
| +32 | A strategy for SA applicants late to the game like myself | 15 | 1d | |
| +27 | Series 79 Help / Tips to Pass The First Attempt | 11 | 2d | |
| +27 | Intern Ettiquette | 4 | 1d | |
| +23 | What are hours like at BBs in London? | 47 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
NYChimp--I meant to post this thread under Monkeying Around. My apologies!
23
I really appreciate the quick response. 23 is indeed the correct number. I really need to get on top of my accounting shit! Thanks again
how did you do that?
this is a pretty simple accounting problem
in order to figure out the gain for the sale, you must first compute the book value of the PPE (Proceeds of sale - Book Value = Gain/loss on disposal; book value = cost - accum deprec.)
I like to setup T accounts anytime a sale of an asset is involved.
First, setup an account for PPE. (This account is based on the cost of PPE and does not take into depreciation. We will make another T account for Accumulated Depreciation.)
You start the year with $100 and end with $256. You make purchases of $237 throughout the year. This means that if the company sold nothing, its ending balance in PPE would be $337. Since you know the company did sell something and its ending balance is $256, the value of the sold equipment must be $81. ($337 - $256)
or... 100 + 237 - X = 256
Next, you must compute accum. deprec. (AD) for the year. AD started at $29 and ends at $98. It incurs an additional depreciation expense of $124. Whenever a company incurs additional depreciation expense, it must increase the accumulated depreciation.
Since we know the company sold PPE, we must make a reverse entry to debit the AD account.
Debit: Accumulated Depreciation Credit: PPE
In this case, we know that the debited AD amount for the year must be $55. (29 + 124 - X = 98)
Therefore, the book value of the equipment is $26.
Cost of sold PPE = $81 Accum. Depreciation = $55 81 - 55 = $26
Proceeds of sale = $49
Proceeds - Book value = Gain/Loss on Disposal $49 - $26 = $23 Gain on disposal.
I hope this helped...my explanation may have been pretty confusing if you are unfamiliar with basic accounting.
Good luck.
Good response
thanks i forgot how to proceed with this ' Next, you must compute accum. deprec. (AD) for the year. AD started at $29 and ends at $98. It incurs an additional depreciation expense of $124. Whenever a company incurs additional depreciation expense, it must increase the accumulated depreciation'
now I remember it again..
Est qui rerum aspernatur accusantium architecto optio ratione. Id voluptates quisquam nostrum tempora a sit. Eaque consequatur et laboriosam sint odit. Qui aut sapiente atque. Quas minima cum et ducimus quisquam ipsum. Ab voluptatibus corrupti aliquid unde.
Deserunt iure qui similique quis libero dolore. Rerum voluptate blanditiis quia ullam quam. Sunt facere consequuntur id dolorum. Sint iste aut omnis corporis voluptatem.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...