On January 1,2015,plant assets,net are $200,000.On December 31,2015,plant assets,net are $300,000.Depreciation expense for the year is $20,000.During the year,plant assets were acquired for $150,000 with cash.There is a Gain on Sale of Plant Asset of $10,000.What are the cash proceeds from the sale of the plant asset?

Question

Quizplus · Accepted Answer

The cash proceeds from the sale of the plant asset can be calculated as follows:

Plant assets, net at the beginning of the year = $200,000
Depreciation expense for the year = $20,000
Plant assets, net at the end of the year = $300,000
Increase in plant assets, net = $300,000 - $200,000 = $100,000
Plant assets acquired during the year with cash = $150,000
Gain on sale of plant asset = $10,000

To calculate cash proceeds, we need to subtract the increase in plant assets (which includes the assets acquired during the year) and add the gain on sale:

Cash proceeds = Gain on sale - (Increase in plant assets - Plant assets acquired during the year)
Cash proceeds = $10,000 - ($100,000 - $150,000)
Cash proceeds = $10,000 - (-$50,000)
Cash proceeds = $10,000 + $50,000
Cash proceeds = $60,000

Therefore, the cash proceeds from the sale of the plant asset are $40,000 (option D is correct).

On January 1,2015,plant Assets,net Are $200,000