How would the following affect the three financial statements?.
Fixed assets disposition:
-- Assume that the Company sold PP&E in 2015:
-- Sale proceeds - $70000
-- Original Cost - $100000
-- Depreciated cost (at the time of the sale) - $30000
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BS: Increased liquidity - $70k of PPE swapped for cash CF: Increase in cash from investing activites of $100k IS: No impact, no gain/loss on sale
Here's my stab at it:
I/S: Other income or Gain on asset sales increases by 40K Net income increases by 40K
CF: CFO is decreased by 40K (Gain on asset sales) CF INV is increased by 70K (Proceeds from asset sales)
BS: Net PP&E decreases by 30K Cash increases by 70k
Not even sure how you arrived at that, but it isn't correct.
Well if I understood the question correctly, then the depreciated cost refers to the net book value (historical cost less accumulated depreciation). Therefore if I have it on my books at an NBV of 30K and I sell it for 70K, then I recognize a gain on disposal of 40K.
Agreed. http://www.accountingcoach.com/cash-flow-statement/explanation/8 pretty simple explanation here.
Misread depreciation cost
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