Eastman Kodak reported that the cost of its PPE on December 31, 2010 was $6,805 million. On January 1, 2010, it had been $7,327 million. Also, the balance of accumulated depreciation on December 31, 2010 was $5,254 million. On January 1, 2010, it had been $5,516 million. Depreciation expense for the fiscal year 2010 was $420 million. During 2010, the company bought new equipment with acquisition cost of $254 million worth. The company also sold PPE and reported a $14 million gain on selling PPE.

Questions:

How much did Kodak sell its PPE for (sale price)?

Kodak sold its PPE for $108 million

Explanation:

The question here has missing sales figure for a PPE item for which the gain on sale is $14 million (given) .Sale price of PPE item are obtained from a PPE Disposal account.We need to first find the other missing figures of 1. Cost of the Sold PPE and 2. The Accumulated Depreciation of the Sold PPE item. After that we complete our PPE disposal account to find the missing figure of the Sale Price of PPE.

1. Cost of Sold PPE

Open a PPE at Cost Account:  Opening Balance $ 7327 million (Debit), Addition of PPE $ 254 million (Debit),Closing Balance $6805 million(Credit).The Balancing figure of this account $ 776 million (credit) {7327+254-6805} is the cost of the PPE item sold.

2. Accumulated Depreciation of the Sold PPE Item

Open a PPE Accumulated Depreciation Account : Opening Balance $ 5516 million (Credit), Depreciation Expense $ 420 million (Credit), Closing Balance $ 5254 million (Debit). The Balancing figure of this account $682 million (Debit) is the Accumulated Depreciation of the PPE item disposed or sold.

3. Disposal Account and Calculation of the Sale Price (Balancing figure)

Open a PPE Disposal Account : Cost of PPE $ 776 million (Debit), Gain on Sale of PPE $ 14 million (Debit), Accumulated Depreciation of the PPE Sold $ 682 million (Credit). The Balancing figure of this account $ 108 million (Credit) {776+14-108} is the Sale Price of PPE item.

Thus Sale price of the PPE is $ 108 million.

in 2001, dell computer became the world’s largest personal computer vendor, continuing to

gain market share and post profits in an industry struggling with slumping sales and billions of

dollars in losses. dell sells 90% of its pcs directly to the final customer, largely bypassing the

reseller channel that accounts for most of the world’s pc sales. this direct customer relationship

is the key to dell’s business model, and provides distinct advantages over the indirect sales

model. dell’s direct relationship with the customer allows it to tailor its offerings to customer

needs, offer add-on products and services, and use the internet to offer a variety of customer

services. in addition, dell’s pcs are built to customers’ specifications upon receipt of an order,

giving dell additional advantages over indirect pc vendors who must try to forecast demand and

ship products based on those forecasts. dell’s direct sales and build-to-order model has achieved

superior performance in the pc industry in terms of inventory turnover, reduced overhead, cash

conversion, and return on investment (kraemer, et al., 2000).

explanation:

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