Analyze the effect of a plant asset addition and disposal; report plant asset transactions on the financial statements
Response to the following problem:
At the end of 2013, Electric Power Associates (EPA) had total assets of $17.6 billion and total liabilities of $9 billion. Included among the assets were property, plant, and equipment with a cost of $4.1 billion and accumulated depreciation of $2.9 billion. EPA completed the following selected transactions during 2014:
The company earned total revenues of $26.6 billion and incurred total expenses of $21.7 billion, which included depreciation of $1.5 billion. During the year, EPA paid $1.7 billion for new property, plant, and equipment and sold old plant assets for $0.9 billion. The cost of the assets sold was $1.8 billion, and their accumulated depreciation was $1.2 billion.