Question

Mercury Company reports depreciation expense of $46,000 for Year 2. Also, equipment costing $159,000 was sold for its book value in Year 2. There were no other equipment purchases or sales during the year. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
At December 31 Year 2 Year 1
Equipment $640,000 $799,000
Accumulated depreciation-equipment 452,000 530,000
a. $35,000.
b. $81,000.
c. $78,000.
d. $39,000.

Answer 1

Answer: a. $35,000.

Explanation:

Given Data:

Starting Balance = $530,000

Closing Balance = $452,000

Depreciation expenses = $46,000

computing of cash received we need to balance the depreciation.

Accumulated depreciation = Starting balance of accumulated depreciation + depreciation expense - Closing balance of accumulated depreciation

= $530,000 + $46,000 - $452,000

= $124,000

subtracting this amount from the sale value of the equipment.

= $159,000  - $124,000

= $35,000

Cash received from sale of equipment is $35,000

Answer 2

Answer:

The cash received from selling the equipment is $35000

Explanation:

To calculate the sales proceeds from the equipment, we need to calculate the book value of the equipment that is sold.

Book value = Cost - Accumulated depreciation

The accumulated depreciation on the equipment sold can be calculated by calculating the change in overall accumulated depreciation. Using the following equation to calculate the closing balance of accumulated depreciation, we can calculate the accumulated depreciation for the equipment that is sold.

Closing balance = Opening balance + Depreciation expense for the year - Accumulated depreciation on the asset disposed

Let Accumulated depreciation on the asset disposed be x.

452000 = 530000 + 46000 - x

x = 576000 - 452000

x = 124000

Thus, the book value of the asset sold was,

Book value = 159000 - 124000  =  $35000

As the asset is sold for its book value, the cash received from sale is also $35000