Jamison Company reports depreciation expense of $35,000 for Year 2.Also,equipment costing $140,000 was sold for a $5,000 gain in Year 2.The following selected information is available for Jamison Company from its comparative balance sheet.Compute the cash received from the sale of the equipment.
A)$23,000.
B)$35,000.
C)$38,000.
D)$40,000.
E)$67,000.

Question

Jamison Company reports depreciation expense of $35,000 for Year 2.Also,equipment costing $140,000 was sold for a $5,000 gain in Year 2.The following selected information is available for Jamison Company from its comparative balance sheet.Compute the cash received from the sale of the equipment. 
A)$23,000. 
B)$35,000. 
C)$38,000. 
D)$40,000. 
E)$67,000.

Quizplus · Accepted Answer

To find the cash received from the sale of equipment, we need to look at the change in the equipment and accumulated depreciation accounts. From the comparative balance sheet, we can see that equipment decreased by $140,000 and accumulated depreciation increased by $105,000 ($70,000 + $35,000). Therefore, the net book value of the equipment sold was $35,000 ($140,000 - $105,000). Since there was a gain on the sale of $5,000, the cash received must have been $40,000 ($35,000 + $5,000). Therefore, the correct answer is C.

Jamison Company Reports Depreciation Expense of $35,000 for Year 2