Sample Essay

The total amount of accumulated depreciation on August 1, 2007 is $32,250.

Cost of machine                                                           48,000

Less: Accumulated Depreciation                                (32,250)

Book value                                                                    15,750

Less: Sale proceeds                                                       (5,000)

Loss on sale of machine                                                10,750

Presentation of Transactions on Statement of Cash Flows

In 2004 the transaction for purchase of machinery would be subtracted from the cash flow from investing activities and the depreciation expense for the year would be included in the non cash adjustments to reconcile net income. The depreciation expense for 2005, 2006 and 2007 will be presented in the non cash items of adjustments to reconcile net income. The sale proceeds from the sale of machine in 2007 will be added in the cash flow from investing activities section while the loss on sale of machine will be included in the non cash adjustments to reconcile net income.

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