Help me please

CFA Level I FRA
#1

An analyst gathers the following information about a company’s equipment base:

Beginning balance accumulated depreciation €7,000,000
Ending balance accumulated depreciation €8,000,000
Depreciation expense of equipment €4,000,000

The company sold equipment having a historical cost of €5,000,000 and reported a loss on sale of €250,000. The cash received from the sale of equipment is:

  1. A.€750,000.
  2. B.€1,750,000.
  3. C.€4,750,000.

Need help with this question. The answer is B but the Institute explaination is unclear

#2

End depn = Opening depn + amortization - accumulated depn on sold equipment
8 = 7 + 4 - accum depn
8 - 7 - 4 = - accum depn
3 = accum depn

Loss on sale = net BV equipment - cash
Loss on sale = (original cost - accum depn) - cash
0.25 = (5 - 3) - cash
0.25 = 2 - cash
cash = 1.75

1 Like
#3

thanks for explaining