A machine with a cost of $234,000 and accumulated depreciation of $153,000 is sold for $63,000 cash.Required:Part a. Prepare the journal entry to record this transaction.Part b. Explain how this transaction would be reported on the statement of cash flows prepared using the indirect method.
What will be an ideal response?
Part a
| Cash | 63,000 | ? |
| Accumulated Depreciation-Equipment | 153,000 | ? |
| Loss on Disposal | 18,000 | ? |
| Equipment | ? | 234,000 |
Part b
The loss on disposal in the amount of $18,000 would be listed in the operating activities section of the statement of cash flows as an adjustment to reconcile net income to net cash provided by operating activities. It would be added back to net income. The proceeds from the sale of $63,000 would be reported as a cash inflow from investing activities in the statement of cash flows.
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