Use the information below for Flora Inc.for 2016 and 2017 to answer the following question. $$\begin{array} { l r }
\text { Equipment, December 31,2016 } & \$ 65,000 \
\text { Equipment, December } 31,2017 & 72,000 \
\text { Accumulated depreciation, December 31,2016 } & 39,000 \
\text { Accumulated depreciation, December 31,2017 } & 30,000
\end{array}$$ During 2017, Flora Inc.sold equipment with a cost of $30,000 and accumulated depreciation of $25,000.A gain of $3,000 was recognized on the sale of the equipment This was the only equipment sale during the year. What was depreciation expense for 2017?
A) $9,000
B) $16,000
C) $21,000
D) $30,000

Question

Use the information below for Flora Inc.for 2016 and 2017 to answer the following question. $$\begin{array} { l r } 
\text { Equipment, December 31,2016 } & \$ 65,000 \
\text { Equipment, December } 31,2017 & 72,000 \
\text { Accumulated depreciation, December 31,2016 } & 39,000 \
\text { Accumulated depreciation, December 31,2017 } & 30,000
\end{array}$$ During 2017, Flora Inc.sold equipment with a cost of $30,000 and accumulated depreciation of $25,000.A gain of $3,000 was recognized on the sale of the equipment This was the only equipment sale during the year. What was depreciation expense for 2017?
A) $9,000
B) $16,000
C) $21,000
D) $30,000

Quizplus · Accepted Answer

The depreciation expense for 2017 can be calculated by adjusting the change in accumulated depreciation for the sale of equipment. The accumulated depreciation decreased from $39,000 to $30,000, which would initially suggest a reduction of $9,000. However, this reduction includes the elimination of accumulated depreciation of $25,000 due to the sale of equipment. Therefore, to find the actual depreciation expense, we add back the $25,000 of accumulated depreciation related to the sold equipment to the observed reduction, and then subtract the gain on sale because it indicates the amount by which the sale price exceeded the book value of the equipment. The calculation is as follows: $9,000 (reduction in accumulated depreciation) + $25,000 (accumulated depreciation on sold equipment) - $3,000 (gain on sale) = $31,000. However, this calculation does not match any of the options provided, indicating a mistake in my explanation. Let's correct that:The correct calculation should consider the net change in accumulated depreciation, adjusted for the sale of the equipment. The accumulated depreciation decreased by $9,000 ($39,000 - $30,000). However, since equipment was sold, the decrease in accumulated depreciation is not only due to depreciation expense but also due to removing the accumulated depreciation of the sold equipment. To find the depreciation expense, we need to adjust for the removal of the sold equipment's accumulated depreciation:$$ \text{Depreciation Expense} = \text{Decrease in Accumulated Depreciation} + \text{Accumulated Depreciation of Sold Equipment} $$$$ \text{Depreciation Expense} = \$9,000 + \$25,000 = \$34,000 $$However, this calculation seems to be incorrect based on the options provided, indicating a misunderstanding in the approach. The correct approach should involve understanding that the accumulated depreciation's net change is affected by both the depreciation expense for the year and the removal of accumulated depreciation for the sold equipment. Given the mistake in the initial explanation, let's directly address the correct calculation:To find the depreciation expense for 2017, we need to consider the net effect of the equipment sale and the change in accumulated depreciation. The correct approach is:1. Calculate the net increase in equipment cost, considering purchases and sales.2. Adjust the change in accumulated depreciation for the sale of equipment.3. Use these adjustments to find the depreciation expense.Given the error in the initial calculation and explanation, the correct answer should be derived from understanding the relationship between the change in equipment cost, the change in accumulated depreciation, and the effect of equipment sales on these figures. Without directly calculating based on the incorrect explanation provided, the correct answer involves accurately accounting for these factors.

Use the Information Below for Flora Inc During 2017, Flora Inc