Sale of Non-Current Asset Question
by Cheong
(Malaysia)
What is the amount I should put into purchases for plant and equipment? Thanks a lot.
A: To answer this, look at the plant and equipment account only (i.e. cost prices of plant and equipment):
- We started with $795,000
- We sold an item that cost us $65,000
- We bought some plant and equipment for a certain amount (the answer we're looking for)
- We had $1,290,000 of plant equipment at the end of the year.
If we arrange this in a mathematical formula we would have:
795,000 - 65,000 + X = 1,290,000
X = 1,290,000 - 795,000 + 65,000
X = 560,000
So the purchases of plant and equipment for the year must have been $560,000.
Make sense?
By the way, I have detailed explanations of accumulated depreciation and depreciation (multiple lessons) and exercises on these topics in my basic accounting books .
Best,
Michael Celender
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