The managerial accountant at the Holiday Musical Academy is required to complete the statement of cash flows. The managerial accountant is required to determine the amount of money the company used to purchase property, plant, and equipment (PP&E) during the year. The balance of PP&E at the beginning of the year is $1,650,000 and the balance of PP&E at the end of the year is $2,750,000. The managerial accountant reviewed the general journal and noticed that the original cost of equipment sold during the year was $50,000. Using the following information, calculate the amount of cash the company paid in cash to purchase new property, plant, and equipment during the year:

Question

Quizplus · Accepted Answer

To calculate the cash used to purchase new PP&E during the year, we need to adjust for the equipment sold during the year. The original cost of the equipment sold was $50,000, so we subtract that from the change in the PP&E balance:

Change in PP&E = Ending PP&E balance - Beginning PP&E balance 
Change in PP&E = $2,750,000 - $1,650,000 
Change in PP&E = $1,100,000

Cash used to purchase new PP&E = Change in PP&E + Equipment sold 
Cash used to purchase new PP&E = $1,100,000 + $50,000 
Cash used to purchase new PP&E = $1,150,000

Therefore, the correct answer is C - $1,150,000.

The Managerial Accountant at the Holiday Musical Academy Is Required