Jamison Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
$$\begin{array} { | l | l | l | }
\hline \text { At December 31 } & { \text { Year 2 } } & \text { Year 1 } \
\hline \text { Equipment } & \$ 610,000 & \$ 750,000 \
\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \
\hline
\end{array}$$
A) $38,000.
B) $23,000.
C) $40,000.
D) $35,000.
E) $67,000.

Question

Jamison Company reports depreciation expense of $35,000 for Year 2. Also, equipment costing $140,000 was sold for a $5,000 gain in Year 2. The following selected information is available for Jamison Company from its comparative balance sheet. Compute the cash received from the sale of the equipment.
$$\begin{array} { | l | l | l | } 
\hline \text { At December 31 } & { \text { Year 2 } } & \text { Year 1 } \
\hline \text { Equipment } & \$ 610,000 & \$ 750,000 \
\hline \text { Accumulated Depreciation-Equipment } & 428,000 & 500,000 \
\hline
\end{array}$$
A) $38,000.
B) $23,000.
C) $40,000.
D) $35,000.
E) $67,000.

Quizplus · Accepted Answer

The cash received from the sale of the equipment is equal to the gain on the sale plus the book value of the equipment. The book value of the equipment is equal to the cost of the equipment minus the accumulated depreciation. The cost of the equipment is $140,000, and the accumulated depreciation is $428,000 - $500,000 = $72,000. Therefore, the book value of the equipment is $140,000 - $72,000 = $68,000. The gain on the sale of the equipment is $5,000. Therefore, the cash received from the sale of the equipment is $68,000 + $5,000 = $73,000.

Jamison Company Reports Depreciation Expense of $35,000 for Year 2