Mattel Inc. is the leading toy maker in the world. The company€™s revenues exceed $ 6 billion. In the toy business, it is very difficult to determine the life expectancy of a product. Products that children love one year may sit on the shelf the following year. As a result, companies in the toy business often sell productive assets that are no longer needed. Assume that on December 31, 2014, the end
of the company€™s fiscal year, Mattel€™s records showed the following data about a machine that was no longer needed to make a toy that was popular last year:

On April 1, 2015, the machine was sold for $ 52,000 cash.
Required:
1. How old was the machine on January 1, 2015? Show computations.
2. Indicate the effect (i.e., the amount and direction, increase or decrease) of the sale of the machine on April 1, 2015, on the following (ignore income taxes):
a. Total assets.
b. Net earnings.
c. Cash flows (by each section of the statement: operating, investing, and financing activities).

Transcribed Image Text:

Machine, original cost Accumulated depreciation Based on an estimated useful life of eight years, a residuel $104,000 55,000 value of $16,000, and straight-line depreciation.