Allison Controls Ltd

Multiple Choice

Allison Controls Ltd. follows a policy of paying cash for everything it buys. At the end of 2011 Allison had a balance in its machine account of $90,000 and the associated accumulated depreciation account of $45,000. Similar amounts at the end of 2010 were $100,000 and $50,000 respectively. During 2011 Allison sold a machine for $10,000. It had cost $25,000 and had accumulated depreciation of $10,000 at the time of the sale. How would these amounts appear on the income and cash flow statements?

A) A loss of $5,000 on the income statement and a net cash outflow of $5,000 on the cash flow statement.
B) A loss of $10,000 on the income statement and a net cash outflow of $15,000 on the cash flow statement.
C) A loss of $15,000 on the income statement and a net cash outflow of $25,000 on the cash flow statement.
D) A loss of $20,000 on the income statement and a net cash outflow of $10,000 on the cash flow statement.
E) A loss of $30,000 on the income statement and a net cash outflow of $20,000 on the cash flow statement.