The following entry was recorded by Woodrow Inc.: $$\begin{array} { | l | r | r | }
\hline \text { Cash } & 57,000 & \
\hline \text { Accumulated depreciation } & \mathbf { 3 3 , 0 0 0 } & \
\hline \text { Loss on disposal of property, plant, and } & & \
\text { equipment (PPE) } & \mathbf { 1 0 , 0 0 0 } & \
\hline \text { PPE } & & \mathbf { 1 0 0 , 0 0 0 } \
\hline
\end{array}$$ What is the effect on Woodrow's financial statements?

Question

The following entry was recorded by Woodrow Inc.: $$\begin{array} { | l | r | r | } 
\hline \text { Cash } & 57,000 & \
\hline \text { Accumulated depreciation } & \mathbf { 3 3 , 0 0 0 } & \
\hline \text { Loss on disposal of property, plant, and } & & \
 \text { equipment (PPE) } & \mathbf { 1 0 , 0 0 0 } & \
\hline \text { PPE } & & \mathbf { 1 0 0 , 0 0 0 } \
\hline
\end{array}$$ What is the effect on Woodrow's financial statements?

Quizplus · Accepted Answer

The entry records the disposal of PPE with a carrying value of $100,000 in exchange for cash proceeds of $57,000 and a loss on disposal of $10,000. The accumulated depreciation related to the PPE is also removed from the balance sheet. Therefore, the carrying value of PPE decreased by $67,000 ($100,000 - $33,000), resulting in a decrease in total assets and total equity. Additionally, the loss on disposal results in a decrease in retained earnings. Option A is incorrect because only cash increased, not current assets as a whole. Option B is incorrect because net assets would not increase due to the loss on disposal. Option D is incorrect because the decrease in retained earnings would be $10,000, not $57,000.

The Following Entry Was Recorded by Woodrow Inc What Is the Effect on Woodrow's Financial Statements? A)Current Assets

The Following Entry Was Recorded by Woodrow Inc What Is the Effect on Woodrow's Financial Statements?
A)Current Assets