On January 1 2017 Castlewood Company purchased

machinery for its #8978

On January 1, 2017, Castlewood Company purchased machinery for its production line for
$104,000. Using an estimated useful life of eight years and a residual value of $8,000, the
annual straight-line depreciation of the machinery was calculated to be $12,000. Castlewood
used the machinery during 2017 and 2018, but then decided to automate its production
process. On December 31, 2018, Castlewood sold the machinery at a loss of $5,000 and
purchased new, fully automated machinery for $205,000.Required1. How would the previous
transactions be presented on Castlewood's statements of cash flows for the years ended
December 31, 2017 and 2018?2. Why would Castlewood sell at a loss machinery that had a
remaining useful life of six years and purchase new machinery with a cost almost twice that of
the old?View Solution:
On January 1 2017 Castlewood Company purchased machinery for its

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