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, Creative Legal Associates (CLA) had total assets of $17 billion and total liabilities of $9.2 billion. Included among the assets were property, plant, and equipment with a cost of $4.2 billion and accumulated depreciation of $2.7 billion. CLA completed the following selected transactions during 2014:
The company earned total revenues of $26.2 billion and incurred total expenses of $22 billion, which included depreciation of $1.6 billion. During the year, CLA paid $1.8 billion for new property, plant, and equipment and sold old plant assets for $0.7 billion. The cost of the assets sold was $1.1 billion, and their accumulated depreciation was $0.8 billion.