Model Question
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
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
Ut aut nostrum quos provident illo deleniti dolores. Nihil dolorum maiores cumque doloribus.
Laudantium eum sint illum sapiente. Iure voluptate consequatur aliquid expedita ratione. Totam quia nihil fuga voluptatem eveniet. Amet exercitationem voluptatibus vel odit voluptas.
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...