Equipment with a cost of $20,000 and a book value of $6,000 was sold during the year for cash of $18,000.Additional equipment was purchased during the year for cash.
The company uses the indirect method in preparing the statement of cash flows.What is the amount of depreciation expense that will be reported in the operating activities section of the statement?
A)$8,000
B)$22,000
C)$14,000
D)$20,000

Question

Equipment with a cost of $20,000 and a book value of $6,000 was sold during the year for cash of $18,000.Additional equipment was purchased during the year for cash.
The company uses the indirect method in preparing the statement of cash flows.What is the amount of depreciation expense that will be reported in the operating activities section of the statement?
A)$8,000 
B)$22,000 
C)$14,000 
D)$20,000

Quizplus · Accepted Answer

Ending accumulated depreciation = Beginning accumulated depreciation + Depreciation expense − Depreciation on equipment sold
Depreciation expense = Ending accumulated depreciation − Beginning accumulated + Depreciation on equipment sold
$184,000 − $190,000 + ($20,000 − $6,000)= $8,000

Equipment with a Cost of $20,000 and a Book Value