The Following Two Scenarios Are Independent of One Another

question 149

Essay

The following two scenarios are independent of one another.
(a)An analysis of the general ledger accounts indicates that office equipment was sold for $39,600 during the year. The equipment originally cost $68,000 and had accumulated depreciation of $22,500 on the date of sale. Indicate how the elements of this transaction would be reported on the statement of cash flows using the indirect method.
(b)An analysis of the general ledger accounts indicates that delivery equipment, which cost $97,000 and on which accumulated depreciation totaled $42,100 on the date of sale, was sold for $57,500 during the year. Using this information, indicate the items to be reported on the statement of cash flows.

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Definitions:

Indirect Costs

Expenses not directly tied to the production of goods or services, such as overhead, utilities, and administration costs.

Allocation Method

A method used in accounting and finance to distribute costs or revenues among different departments, products, or projects based on certain criteria.

Plantwide Overhead Rate

A single overhead absorption rate used throughout a manufacturing plant for allocating indirect costs to products.

Allocation Base

A factor used to distribute costs among different departments, products, or activities in a systematic and rational manner.