Question

A comparative balance sheet and income statement is shown for Cruz, Inc. CRUZ, INC. Comparative Balance Sheets December 31, 2017 2017 2016 Assets Cash $ 64,400 $ 16,200 Accounts receivable, net 27,800 34,400 Inventory 58,200 64,600 Prepaid expenses 3,600 2,900 Total current assets 154,000 118,100 Furniture 72,600 82,200 Accum. depreciation—Furniture (11,300 ) (6,200 ) Total assets $ 215,300 $ 194,100 Liabilities and Equity Accounts payable $ 10,100 $ 14,300 Wages payable 6,100 3,400 Income taxes payable 1,000 1,800 Total current liabilities 17,200 19,500 Notes payable (long-term) 20,700 47,800 Total liabilities 37,900 67,300 Equity Common stock, $5 par value 154,500 124,000 Retained earnings 22,900 2,800 Total liabilities and equity $ 215,300 $ 194,100 CRUZ, INC. Income Statement For Year Ended December 31, 2017 Sales $ 332,400 Cost of goods sold 213,900 Gross profit 118,500 Operating expenses Depreciation expense $ 25,600 Other expenses 60,700 86,300 Income before taxes 32,200 Income taxes expense 11,800 Net income $ 20,400 Furniture costing $56,600 is sold at its book value in 2017. Acquisitions of furniture total $47,000 cash, on which no depreciation is necessary because it is acquired at year-end. What is the cash inflow related to the sale of furniture? rev: 02_19_2019_QC_CS-159605

Answer 1

Answer:

Cruz Inc.

Cash inflow from the sale of Furniture:

Difference in the accumulated depreciation account is transferred to Sale of Furniture:

Accumulated Depreciation- Furniture

Opening Balance - $6,200

Plus Depreciation Expense - $25,600

Less Credit Balance - $11,300

Balance transferred to sale of furniture = $20,500

Sales of Furniture Account

Debit: Furniture Account (book value) = $56,600

Credit: Accumulated Depreciation = $20,500

Credit: Cash inflow = $36,100

Explanation:

The cash inflow is the difference between the book value of the furniture sold and its attributable accumulated depreciation.

The attributable accumulated depreciation is the difference between opening accumulated depreciation and depreciation expenses less closing accumulated depreciation.  This difference represents the amount of accumulated depreciation transferred out, as a result of the sale.