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Homework answers / question archive / Depreciation and sale of equipment (questions1 and 2): Downton Smith Ltd

Depreciation and sale of equipment (questions1 and 2): Downton Smith Ltd

Accounting

Depreciation and sale of equipment (questions1 and 2):

Downton Smith Ltd. purchased a piece of machinery on Jan 1st 2013 for €400,000. The company estimated a useful life of 10 years and a residual value of zero for this asset. On December 31st 2015, the company decided to sell the machinery for €350,000.

1. What is the accumulated depreciation of this piece of machinery on December 31, 2015 right before selling it?

€80,000

€120,000

€280,000

€320,000

2. What is the gain or loss on the sale of this machinery at the end of 2015?

Gain of €50,000

Loss of €50,000

Gain of €70,000

Loss of €70,000

The Cash Flow Statement direct method (questions 3 - 6):

For the remaining questions, please consider the following cash transactions that happened in the company Becker GmbH in 2015 (amounts in €000):

· Collections from customers: 500

· Purchase of equipment: 40

· Payment of dividends: 30

· Payment of taxes: 20

· Proceeds from sale of equipment: 20

· Payment to suppliers: 300

· Payment of salaries and administration expenses: 75

· Payment of prepaid rent: 5

· Acquisition of a long term loan: 90

3. Compute the cash flow from operations (CFO)?

80

100

105

120

 

4. Compute the cash flow from investing activities (CFI).

-60

-20

20

30

 

5. Compute the cash flow from financing activities (CFF).

-120

-60

40

60

 

6. How much was the total change in cash in 2015?

140

0

80

180

Reviewing the Income Statement (questions 7 - 9)

Vertikal SA imports and distributes climbing gear. Its profit and loss account for the year x5 has the following items (amounts in €000):

· Debits: interest expense of 10, salaries expenses of 80, depreciation expense of 20, cost of goods sold of 150, utilities expenses of 30, rent expense of 15, and tax expense of 20.

· Credits: sales revenues of 350, and gain on sale of office equipment of 5.

The net income is 30.

7. Compute the gross margin for x5.

€100

€120

€205

€200

 

8. Compute the operating profit for x5.

€80

€55

€60

€75

9. Compute the profit before taxes for x5.

€60

€50

€75

€55

 

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