Question

IZ Corporation purchased land for $400,000. Later in the year, the company sold a different piece of land with a book value of $200,000 for $240,000. How are the effects of these transactions reported on the statement of cash flows? Use the minus sign to indicate cash outflows, cash payments, decreases in cash and for any adjustments, if required. If a transaction has no effect on the statement of cash flows, select "No effect" from the drop down menu and leave the amount box blank.

Answer 1

Answer:

The answer is stated below:

Explanation:

The effects of the transactions which should be reported on the cash flow statement is shown as:

The sale and the purchase of the land are the part of the cash flow from investing activities as:

Cash paid for the purchase of land................................. ($400,000)

Cash received from the sale of land................................ $240,000

The gain on sale of the land is reported under the cash from operating activities, it is deducted from net income.

Gain on sale of land................................... ($40,000)

Note: (), this depict the minus sign.

Working notes:

Gain on sale of land = Sale value - Book value

= $240,000 - $200,000

= $40,000