On January 1,2011,Beyers Company pays $205,000 cash for factory equipment that has an estimated useful life of 10 years and an expected residual value of $5,000.What will Beyers report on its income statement for the year ended December 31,2011?

Question

Quizplus · Accepted Answer

In the year ended December 31, 2011, Beyers Company will report depreciation expense of $20,000 ($205,000 - $5,000 = $200,000 / 10 years = $20,000 per year). This is not a cash outflow and will be reported on the income statement as an expense. The purchase of the factory equipment is an investing activity cash outflow, but this relates to the balance sheet and not the income statement.

On January 1,2011,Beyers Company Pays $205,000 Cash for Factory Equipment