The following selected account balances relate to the plant asset accounts of La
ID: 2473058 • Letter: T
Question
The following selected account balances relate to the plant asset accounts of Lazari Inc. at year-end.
2014
2013
ADDITIONAL INFORMATION
1. Lazari purchased $85,000 of equipment and $50,000 of land for cash in 2014.
2. Lazari also sold equipment in 2014.
3. Depreciation expense in 2014 was $37,500 on building and $62,000 on equipment.
INSTRUCTIONS
(A) Determine the amounts of any cash inflows or outflows related to the plant asset accounts in 2014. Cash proceeds $5,000.
(B) Indicate where each of the cash inflows or outflows identified in (A) would be classified on the statement of cash flows.
2014
2013
Accumulated depreciation—buildings $337,500 $300,000 Accumulated depreciation—equipment 144,000 96,000 Buildings 750,000 750,000 Depreciation expense 99,500 85,500 Equipment 300,000 240,000 Land 120,000 70,000 Loss on disposal of plant assets 6,000 0Explanation / Answer
Buildings Accumulated Depreciation -Buildings Debit Credit Debit Credit Op.Balance 750000 Op.Balance 300000 2014 Depreciation 37500 Cl.Balance 750000 Cl.Balance 337500 750000 750000 337500 337500 Equipment Accumulated Depreciation -Equipment Debit Credit Debit Credit Op.Balance 240000 Op.Balance 96000 Cash purchases 85000 2014 Depreciation 62000 Cash 5000 Depn. Written back on sold assets 14000 Loss on sale 6000 Accumulated Depn. Eqpt. 14000 Cl.Balance 144000 Cl.Balance 300000 158000 158000 325000 325000 Land Debit Credit Op.Balance 70000 Additions 50000 Cl.Balance 120000 120000 120000 Depreciation expense For 2014 99500 Less : Depn.-bldgs. 37500 Depn. -Eqpt. 62000 Depn. On sold eqpt 14000 Depn. On rem. Eqpt 48000 Journal entry for sale of Equipment Cash 5000 Loss on sale 6000 Accumulated Depn. Eqpt. 14000 Equipment 25000 (A) Cash inflows and outflows related to the plant asset accounts in 2014 Cash inflows Sale of Equipment 5000 Cash outflows Equipment purchases 85000 Additions to Land 50000 Total cash outflows 135000 B) Sale of Equipment 5000 Investing cash flow-Inflow(+) Equipment purchases 85000 Investing cash flow-outflow(-) Additions to Land 50000 Investing cash flow-outflow(-) Depn.for the year & Loss on sale as adj. to Net Income of the year in Opg. Cash flow Cash Flow Statement for the Year Ended 2104 Cash flow from Operating activities: Net Income for the Year 2014 Add: Adjustments for Non-cash expense items Depreciation for 2014 99500 Loss on Sale of Equipment 6000 105500 Cash generated by/used in Operating activities Cash flow from Investing activities: Sale of Equipment 5000 Equipment purchases -85000 Additions to Land -50000 Cash used in Investing activities -130000