Effects of gains and losses from sales of equipment on cash flows. The text does not present material that show s how to answer these questions. You w ill need to think the answers through for yourself. Exhibit 4.20 presents an abbreviated statement of cash flows for Largay Corporation for the current \ear (amounts in thousands). After preparing this statement of cash flows for the current year, you discover that the firm sold an item of equipment on the last day of the year but failed to record it in the accounts or to deposit the check received from the purchaser. The equipment originally cost S50.000 and had accumulated depreciation of S40.000 at the time of sale. Recast the statement of cash flow s in the exhibit, assuming that Largay Corporation sold the equipment for cash in the following amounts (ignore income taxes):

a. SI 0.000

b. SI 2.000

c. S8.000 EXHIBIT 4.20 LflRGRY C0RP0RRTI0N Statement of Cash Flows for the Current Year

(Exercise 31) (all dollar amounts in thousands)

OPERATIONS Net Income $100 Depreciation Expense 15 Changes in Working Capital Accounts (40)

Cash Flow from Operations S 75 INVESTING Acquisition of Buildings and Equipment (30)

FINANCING Repayment of Long-term Debt (40)

Change in Cash $ 5 Cash, Beginning of Year 27 Cash, End of Year $ 32