Fireworks City
Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method.
-Refer to Fireworks City. During the year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occurred during the period?
A)The company purchased additional equipment during the year.
B)The selling price of the equipment sold was reported with net sales.
C)The company did not purchase additional equipment during the year.
D)The equipment sold had not been reported with the company's property, plant and equipment.

Question

Fireworks City
Information for 2020 and 2019 is presented below for this company which uses the straight-line depreciation method. 
-Refer to Fireworks City. During the year, the company sold some equipment that had an original cost of $60,000. Which statement is true concerning transactions that must have occurred during the period?
A)The company purchased additional equipment during the year. 
B)The selling price of the equipment sold was reported with net sales. 
C)The company did not purchase additional equipment during the year. 
D)The equipment sold had not been reported with the company's property, plant and equipment.

Quizplus · Accepted Answer

The sale of equipment does not directly indicate whether new equipment was purchased or not. However, companies often replace old equipment to maintain or enhance operational capacity, suggesting that the purchase of additional equipment is a common practice.

Fireworks City Information for 2020 and 2019 Is Presented Below for This