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Equipment ended the year at $221,000. The beginning balance was $60,000 and equipment costing $10,000 was sold during the year. How much equipment was purchased?
A$271,000
B$161,000
C$151,000
D$171,000
Answer & Solution
Correct answer: D. $171,000
1. Purchases = ending balance − (beginning balance − cost of equipment sold).
2. = $221,000 − ($60,000 − $10,000).
3. = $221,000 − $50,000 = $171,000.
4. Trap: $161,000 ignores the disposal; you must remove the sold cost from the beginning balance first.
_Source: Jonick, Principles of Financial Accounting (CC BY-SA 4.0), §7.2.3 "Investing Activities Section", p.275_
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