Beginning and ending plant assets are $325,000 and $370,000 respectively. Beginning and ending accumulated depreciation are $82,800 and $95,000 respectively. Depreciation expense for the period was $30,000, and new assets of $76,000 were purchased. Plant assets were sold at a $10,500 loss. What were the cash proceeds from the sale?

Question

Quizplus · Accepted Answer

First, we need to calculate the net change in plant assets and accumulated depreciation for the period:

Net plant assets = Ending plant assets - Beginning plant assets 
Net plant assets = $370,000 - $325,000 
Net plant assets = $45,000

Net accumulated depreciation = Ending accumulated depreciation - Beginning accumulated depreciation 
Net accumulated depreciation = $95,000 - $82,800 
Net accumulated depreciation = $12,200

Next, we need to adjust for any additional transactions during the period:

Depreciation expense = $30,000 
New assets purchased = $76,000 
Loss on sale of plant assets = $10,500

To calculate the cash proceeds from the sale, we need to first determine the original cost of the plant assets sold:

Original cost of plant assets sold = Cost of plant assets - Accumulated depreciation 
Original cost of plant assets sold = Cost of plant assets - (Beginning accumulated depreciation + Depreciation expense)

We are not given the cost of the plant assets sold, so we cannot calculate the original cost.

However, we know that the loss on the sale was $10,500, which means that the cash proceeds must have been less than the book value of the plant assets (i.e. the original cost minus accumulated depreciation).

The only answer that is less than the book value of the plant assets is option C, $2,700. Therefore, the answer is C.

Beginning and Ending Plant Assets Are $325,000 and $370,000 Respectively