Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $40,000 cash was received from the sale.

Question

Kayla Brown · Accepted Answer

Final Answer : False, Explanation :  We can determine the cash received by using the formula:Cash received = Sale price - Accumulated depreciation - LossCash received = Sale price - $40,000 - (-$10,000)Cash received = Sale price - $40,000 + $10,000Cash received = Sale price - $30,000Since we know the accumulated depreciation is $40,000 and the loss is $10,000, the sale price would need to be:Sale price = Equipment cost - Accumulated depreciation - LossSale price = $100,000 - $40,000 - $10,000Sale price = $50,000Therefore, the cash received would be:Cash received = Sale price - $30,000Cash received = $50,000 - $30,000Cash received = $20,000So the statement in the question is false, and the correct answer is B.

Equipment costing $100,000 with accumulated depreciation of $40,000 is sold at a loss of $10,000.This implies that $40,000 cash was received from the sale.

Definitions

Learning Objectives

Learning Objectives

Related questions