Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
A)$32,000.
B)$68,000.
C)$38,000.
D)$40,000.
E)$36,000.

Question

Mercury Company reports depreciation expense of $40,000 for Year 2. Also, equipment costing $150,000 was sold for its book value in Year 2. The following selected information is available for Mercury Company from its comparative balance sheet. Compute the cash received from the sale of the equipment. 
A)$32,000. 
B)$68,000. 
C)$38,000. 
D)$40,000. 
E)$36,000.

Quizplus · Accepted Answer

Since the equipment was sold for its book value, there was no gain or loss on the sale. Therefore, the cash received from the sale of equipment is equal to its book value, which can be calculated as follows:
Book value of equipment = Cost of equipment - Accumulated depreciation
Book value of equipment = $150,000 - $40,000 = $110,000
Therefore, the cash received from the sale of equipment is $110,000.

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