Equipment costing $10,000 was sold for $5,000; book value of the equipment was $8,000.
How to show it in a cash flow statement (indirect method)?
balance sheet 2010/2009
equipment 15,000/0
depreciation 21,000/11,000
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Equipment costing $10,000 was sold for $5,000; book value of the equipment was $8,000.
How to show it in a cash flow statement (indirect method)?
balance sheet 2010/2009
equipment 15,000/0
depreciation 21,000/11,000
Cash means cash so the proceeds of sale are included under capital flows
OK, should it look like this?Quote:
Originally Posted by paraclete
Cash flow statement
Equipment (28,000)
Depreciation 12,000
But what the name of the entry where should I write loss and received money?
I'm not sure what you are discussing; cash flow statements, balance sheets or profit and loss statements. The data you have provided so far contributes to each.
Cash Flow Statement refers to cash flows so depreciation plays no part in it, if the equiptment was purchased in a different accounting period it is not shown in the cash flow statement, if it is purchased in this period it is part of capital flows.
loss on sale belongs in the Profit and Loss Statement, values carried forward belong in the Balance Sheet
Under the indirect method of preparing cashflows, the profit before tax must be adjusted to take into account non-cash items such as depreciation.
So in your scenario there are adjustments required in the cashflow for the depreciation and the loss on disposal to arrive at the figure for net cashflows from operating activities.
As a loss/gain on disposal is basically a depreciation adjustment, it is a non-cash item and must be added back to profit before tax for a loss on disposal, whilst a gain on disposal needs to be deducted.
In your scenario, the equipment has a carrying value of $8,000, and was sold for $5,000. Therefore there is a loss on disposal of $3,000 - this must be added back to profit before tax.
The overall depreciation charge for the year must also be added back to the profit before tax -possibly adjusted for the depreciation related to the sold equipment. However, I can't calculate that because the figures given in your opening post don't make sense. For example, there's a nil balance for equipment in the 2009 balance sheet.. yet an $11,000 depreciation charge as well. That is not possible. So you've either made a mistake when typing in the numbers here, or you've missed out required information from the question you're tackling.
In the cashflow statement, the $5,000 cash proceeds from the sale will go under the heading of "Cash Flows from Investing Activities" as a cash inflow: Proceeds of sale of equipment.
If you want to start in the P&L you adjust the profit, revenues and expenditures for depreciation, movement in receivables and payables, etc and you wind up with the operating side of the cash flow statement, you then have to consider financing flows and capital flows, these are obtained by examining movements recorded in the Balance Sheet
The information contained in the original question was incomplete if you wanted to compile a cash flow statement
Quote:
Originally Posted by Fidget1
Sorry for the wrong numbersQuote:
Originally Posted by paraclete
here is the right variant:
balance sheet 2010/2009
cash 30,000/35,000
accounts receivable (net) 55,000/45,000
inventory 65,000/45,000
prepaid expenses 15,000/25,000
equipment 90,000/75,000
accumulated depreciation (18,000)/(8,000)
Land 70,000/40,000
total 307,000/257,000
Accounts payable 65,000/52,000
accrued expenses 15,000/18,000
notes payable - bank 0/23,000
bonds payable 30,000/0
common stock 189,000/159,000
retained earnings 8,000/5,000
total 307,000/257,000
additional information:
1)Land was acquired for $30,000 in exchange for common stock, par $30,000, during the year
2)All equipment purchased was for cash.
3)Equipment costing $13,000 was sold for $3,000; book value of the equipment was $6,000.
4)Cash dividends of $9,000 were declared and paid during the year.
my first cash flow statement was:
Operating
Increase in receivables (10 000)
Increase in inventory (20 000)
Increase account payables 13 000
Decrease in accrued expenses (3 000)
Decrease in prepaid expenses 10 000
(10 000)
Investing:
Purchase of Equipment (28 000)
(28 000)
Financing:
Notes payable (23 000)
Bonds payable 30 000
Dividends (9 000)
(2 000)
Total: (40 000)
Adjustments
Depreciation (17 000)
So I should add "Proceeds of sale of equipment", right?
Yes that is a factor but to balance you need to reconcile with the movement of cash at bankQuote:
Originally Posted by Jack17012
The real question is what game have you been playing?
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