Kingston Jerk Factory reported the following results for 2017: $\begin{array}{lll}&\text { December } 31&\text { January } 1\
\text { Property, plant, and equipment } & \$ 420,000 & \$ 405,000 \
\text { Accumulated depreciation } &{(189,000)} & ( 180,000) \
\text { Net property, plant, and equipment } &{\$ 231,000}& \$ 225,000
\end{array}$ During 2017, 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 2017?

Question

Kingston Jerk Factory reported the following results for 2017: $\begin{array}{lll}&\text { December } 31&\text { January } 1\
\text { Property, plant, and equipment } & \$ 420,000 & \$ 405,000 \
\text { Accumulated depreciation } &{(189,000)} & (  180,000) \
\text { Net property, plant, and equipment } &{\$ 231,000}& \$ 225,000
\end{array}$ During 2017, 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 2017?

Quizplus · Accepted Answer

To find the cash paid for new equipment, we start by calculating the change in net property, plant, and equipment (PPE), then adjust for the sale of equipment. The net PPE at the beginning of the year was $225,000 and at the end of the year was $231,000, an increase of $6,000. The equipment sold had an original cost of $39,000 with accumulated depreciation of $31,000, resulting in a book value of $8,000. Since it was sold for $13,000, this means there was a gain of $5,000, which should be subtracted from the net increase in PPE. Therefore, the cash paid for new equipment is the net increase in PPE ($6,000) plus the cost of the equipment sold ($39,000) minus the gain on sale ($5,000), totaling $54,000.

Kingston Jerk Factory Reported the Following Results for 2017 During 2017, the Company Sold Equipment That Had an Original