70.2K

Verified Solution

Link Copied!

Barts Company has prepared the PP&E and depreciation schedule shown in the Exhibit. The following information is available. (Assume the beginning balance has been audited.):

1. The land was purchased eight years ago when building 1 was erected. The location was then remote but now is bordered by a major freeway. The appraised value of the land is $35 million.
2. Building 1 has an estimated useful life of 35 years and no residual value.
3. Building 2 was built by a local contractor this year. It also has an estimated useful life of 35 years and no residual value. The company occupied it on May 1 this year.
4. Computer A system was purchased January 1 six years ago when the estimated useful life was eight years with no residual value. It was sold on May 1 for $500,000.
5. Computer B system was placed in operation as soon as Computer A system was sold. It is estimated to be in use for six years with no residual value at the end.
6. The company estimated the useful life of the press at 20 years with no residual value.
7. Auto 1 was sold during the year for $1,000.
8. Auto 2 was purchased on July 1. The company expects to use it five years and then sell it for $2,000.
9. All depreciation is calculated on the straight-line method using months of service.

Required:

What will auditors expect to find in the Gain and Loss on Sale of Assets account? What amount of cash flow from investing activities will be in the statement of cash flows?

EXHIBIT PP&E and Depreciation

Asset Cost (000s) Accumulated Dopreciation (000s) Beginning Ending Ending Beginning Sold Sold Dascription Land Building B lance Addod Balanc Balanc Addod Balanc 10,000 10,000 857 7,714 30,000 30,000 6,857 Building 2 Computer A Computer B 42,000 800 208 583 42,000 800 3,958 5,000 5,000 0 3,750 0 3,500 3,500 1,500 0 583 450 1,500 300 150 Press Auto 1 15 15 15 15 0 2 Auto 2 2 3,973 5,015 87022 2,600 Total 46,515 45,522 10,922 9,549

Answer & Explanation Solved by verified expert

See Answer