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Cornerstones of Financial Accounti...

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Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Determining Cash Flows 1from Investing Activities

Airco owns several aircraft and its balance sheet indicated the following amounts for its aircraft accounts at the end of 2019 and 2018:

Chapter 11, Problem 42E, Determining Cash Flows 1from Investing Activities Airco owns several aircraft and its balance sheet

Required:

1. Assume that Airco did not sell any aircraft during 2019. Determine the amount of depreciation expense for 2019 and the cash spent for aircraft purchases in 2019.

2. If Airco sold for cash aircraft that cost $4,100,000 with accumulated depreciation of $3,825,000 producing a gain of $193,000, determine (a) the amount of depreciation expense, (b) the cash paid for aircraft purchases in 2019, and (c) the cash inflow from the disposal of aircraft.

To determine

(a)

Introduction:

Income from investing activities is a thing on the income articulation that reports the total change in an organization’s money position coming about because of speculation additions or misfortunes and changes coming about because of sums spent on interests in capital resources, for example, plant and equipment.

Assume that Airco did not sell any aircraft during 2019. Determine the amount of depreciation expense for 2019 and the cash spent for aircraft purchases in 2019.

Explanation

Prepare Equipment account and accumulated depreciation

Equipment Accounts

Particular Amount ($) Particular Amount ($)
Balance b/d
Bank a/c (Purchase) (Bal.fig)
22,250,000
10,450,000
32,700,000
Balance c/d 32,700,000
32,700,...
To determine

(b)

Introduction:

Income from investing activities is a thing on the income articulation that reports the total change in an organization’s money position coming about because of speculation additions or misfortunes and changes coming about because of sums spent on interests in capital resources, for example, plant and equipment.

If Airco sold for cash aircraft that cost $4,100,000 with accumulated depreciation of $3,825,000 producing a gain of $193,000, determine (a) the amount of depreciation expense, (b) the cash paid for aircraft purchases in 2019, and (c) the cash inflow from the disposal of aircraft.

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