Jeffreys Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $240,000 was sold for a $10,000 loss in Year 2.The following selected information is available for Jeffreys Company from its comparative balance sheet.Compute the cash received from the sale of the equipment.
A)$62,000.
B)$38,000.
C)$28,000.
D)$18,000.
E)$58,000.

Question

Jeffreys Company reports depreciation expense of $40,000 for Year 2.Also,equipment costing $240,000 was sold for a $10,000 loss in Year 2.The following selected information is available for Jeffreys Company from its comparative balance sheet.Compute the cash received from the sale of the equipment. 
A)$62,000. 
B)$38,000. 
C)$28,000. 
D)$18,000. 
E)$58,000.

Quizplus · Accepted Answer

We need to use the information given in the question to calculate the cash received from the sale of equipment. 
First, we need to find the book value of the equipment: 
Book value of equipment = Equipment cost - accumulated depreciation 
Book value of equipment = $240,000 - $80,000 (depreciation for Year 1 and Year 2) = $160,000 
Next, we need to calculate the loss on the sale of equipment: 
Loss on sale of equipment = Equipment cost - cash received 
$10,000 = $240,000 - cash received 
Cash received = $240,000 - $10,000 = $230,000 
Therefore, cash received from the sale of equipment is $230,000.

Jeffreys Company Reports Depreciation Expense of $40,000 for Year 2