Preston Corporation uses the indirect method to prepare the cash flow from operating activities section of the statement of cash flows. The company had the following beginning and ending balances for Year 2:
During Year 2, Preston sold equipment for $60,000 that had originally been purchased for $140,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment, Preston purchased new equipment by making a $30,000 down payment and signing a two-year note for the balance due of $160,000.
Required:a)What was the cost of the new equipment purchased during the year?b)What is the gain or loss on the sale of the old equipment?c)How will the gain or loss be reported on the statement of cash flows?d)How will the sale of the equipment be reported in the cash flow from investing activities section of the statement of cash flows?e)How will the purchase of equipment be reported in the cash flow from investing activities section of the statement of cash flows?f)How will the issuance of the two-year note be reported on the statement of cash flows?

Question

Preston Corporation uses the indirect method to prepare the cash flow from operating activities section of the statement of cash flows. The company had the following beginning and ending balances for Year 2:
  During Year 2, Preston sold equipment for $60,000 that had originally been purchased for $140,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment, Preston purchased new equipment by making a $30,000 down payment and signing a two-year note for the balance due of $160,000.
Required:a)What was the cost of the new equipment purchased during the year?b)What is the gain or loss on the sale of the old equipment?c)How will the gain or loss be reported on the statement of cash flows?d)How will the sale of the equipment be reported in the cash flow from investing activities section of the statement of cash flows?e)How will the purchase of equipment be reported in the cash flow from investing activities section of the statement of cash flows?f)How will the issuance of the two-year note be reported on the statement of cash flows?

Quizplus · Accepted Answer

The Answer of Preston Corporation uses the indirect method to prepare the cash flow from operating activities section of the statement of cash flows. The company had the following beginning and ending balances for Year 2:
  During Year 2, Preston sold equipment for $60,000 that had originally been purchased for $140,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment, Preston purchased new equipment by making a $30,000 down payment and signing a two-year note for the balance due of $160,000.
Required:a)What was the cost of the new equipment purchased during the year?b)What is the gain or loss on the sale of the old equipment?c)How will the gain or loss be reported on the statement of cash flows?d)How will the sale of the equipment be reported in the cash flow from investing activities section of the statement of cash flows?e)How will the purchase of equipment be reported in the cash flow from investing activities section of the statement of cash flows?f)How will the issuance of the two-year note be reported on the statement of cash flows?

Preston Corporation Uses the Indirect Method to Prepare the Cash