Xi Co provides you with the following information about its equipment account: Opening balance of equipment $\quad \$ 300,000$
Closing balance of equipment $\quad \$ 550,000$ If machinery that originally cost $100,000 was sold during the year, what was the value of new equipment purchased?
A)$250,000.
B)$350,000.
C)$550,000.
D)$150,000.

Question

Quizplus · Accepted Answer

The value of new equipment purchased can be calculated by adjusting the closing balance for the sale of equipment and comparing it to the opening balance. The opening balance is $300,000, and machinery costing $100,000 was sold, reducing the asset base. To reach a closing balance of $550,000, the company must have purchased $350,000 worth of new equipment. This is because the net increase in equipment value is $250,000 ($550,000 closing balance - $300,000 opening balance), and to account for the sale of the $100,000 equipment, an additional $100,000 is added to the net increase, totaling $350,000 in new purchases.

Xi Co Provides You with the Following Information About Its $300,000\quad \$ 300,000$300,000

Xi Co Provides You with the Following Information About Its $\quad \$ 300,000$