Kingston Jerk Factory reported the following results for 2014:
$\begin{array}{llr}&\text { December } 31&\text { January } 1\
\text { Property, plant, and equipment } & \$ 420,000 & \$ 405,000 \
\text { Accumulated depreciation } & \underline{(189,000)} & (180,000) \
\text { Net property, plant, and equipment } & \$ 231,000 & \$ 225,000 \
\hline
\end{array}$
During 2014, the company sold equipment that had an original cost of $39,000 and accumulated depreciation of $31,000 for $13,000. New equipment was purchased for cash during the year. How much is reported for cash paid to acquire property, plant, and equipment on the statement of cash flows for 2014?

Question

Quizplus · Accepted Answer

The change in net property, plant, and equipment from January 1 to December 31 is $6,000 ($231,000 - $225,000). The sale of equipment resulted in a net decrease of $8,000 ($39,000 - $31,000) in net property, plant, and equipment. Therefore, the cash paid for new equipment is $6,000 (change) + $8,000 (decrease from sale) = $14,000. However, the original cost of the equipment sold was $39,000, so the cash paid for new equipment is $54,000 ($420,000 - $405,000 + $39,000 - $31,000).

Kingston Jerk Factory Reported the Following Results for 2014 During 2014, the Company Sold Equipment That Had an Original