Painter Corporation had the following beginning and ending balances for the current year:
During the year, Painter sold equipment, which had originally been purchased for $160,000, for cash of $60,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment Painter purchased new equipment by making a $20,000 down payment and signing a 2-year note for the balance.Required:
1) Calculate the cost of the new equipment.2) What was the amount of the gain or loss on the sale of the old equipment? If Painter uses the indirect approach to calculate cash flow from operating activities, how will the gain or loss be reported on the statement of cash flows?
3) What was the amount of depreciation expense for the year? How will the depreciation expense affect the statement of cash flows prepared by the indirect method?
$$\begin{array} { | l | r | r | }
\hline & { \text { Beginning } } & { \text { Ending } } \
\hline \text { Equipment } & \$ 850,000 & \$ 870,000 \
\hline \text { Accumulated depreciation } & 300,000 & 280,000 \
\hline
\end{array}$$

Question

Painter Corporation had the following beginning and ending balances for the current year:
During the year, Painter sold equipment, which had originally been purchased for $160,000, for cash of $60,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment Painter purchased new equipment by making a $20,000 down payment and signing a 2-year note for the balance.Required:
1) Calculate the cost of the new equipment.2) What was the amount of the gain or loss on the sale of the old equipment? If Painter uses the indirect approach to calculate cash flow from operating activities, how will the gain or loss be reported on the statement of cash flows?
3) What was the amount of depreciation expense for the year? How will the depreciation expense affect the statement of cash flows prepared by the indirect method?
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { Beginning } } & { \text { Ending } } \
\hline \text { Equipment } & \$ 850,000 & \$ 870,000 \
\hline \text { Accumulated depreciation } & 300,000  & 280,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The Answer of Painter Corporation had the following beginning and ending balances for the current year:
During the year, Painter sold equipment, which had originally been purchased for $160,000, for cash of $60,000. The old equipment had accumulated depreciation of $120,000 at the time of sale. To replace the equipment Painter purchased new equipment by making a $20,000 down payment and signing a 2-year note for the balance.Required:
1) Calculate the cost of the new equipment.2) What was the amount of the gain or loss on the sale of the old equipment? If Painter uses the indirect approach to calculate cash flow from operating activities, how will the gain or loss be reported on the statement of cash flows?
3) What was the amount of depreciation expense for the year? How will the depreciation expense affect the statement of cash flows prepared by the indirect method?
 $$\begin{array} { | l | r | r | } 
\hline &  { \text { Beginning } } & { \text { Ending } } \
\hline \text { Equipment } & \$ 850,000 & \$ 870,000 \
\hline \text { Accumulated depreciation } & 300,000  & 280,000 \
\hline
\end{array}$$

Painter Corporation Had the Following Beginning and Ending Balances for the Current