P7-77B. (Learning Objective 6: Reporting PPE transactions on the statement of cash flows) At the end of 20X5, Great Financial Associates (GFA) had total assets of €17.4 billion and total liabilities of €9.9 billion. Included among the assets were property, plant, and equipment with a cost of €4.6 billion and accumulated depreciation of €3.3 billion.

GFA completed the following selected transactions during 20X6. The company earned total revenues of €26.1 billion and incurred total expenses of €21.0 billion, which included depreciation of €1.9 billion. During the year, GFA paid €1.6 billion for new property, plant, and equipment and sold old PPE for €0.3 billion. The cost of the assets sold was €1.1 billion, and their accumulated depreciation was €0.5 billion.

Requirements 1. Explain how to determine whether GFA had a gain or loss on the sale of old PPE during the year. What was the amount of the gain or loss, if any?

2. Show how GFA would report property, plant, and equipment on the Balance Sheet at December 31, 20X6, after all the year’s activity. What was the book value of property, plant, and equipment?

3. Show how GFA would report its operating activities and investing activities on its statement of cash flows for 20X6. Ignore gains and losses.