Question 16.5: Land Transactions on the Statement of Cash Flows Alpha Corpo......
Land Transactions on the Statement of Cash Flows
Alpha Corporation purchased land for $125,000. Later in the year, the company sold a different piece of land with a book value of $165,000 for $200,000. How are the effects of these transactions reported on the statement of cash flows?
The gain on sale of land is deducted from net income as shown below.
Gain on sale of land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (35,000)
The purchase and sale of land is reported as part of cash flows from investing activities as shown below.
Cash received from sale of land . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Cash paid for purchase of land . . . . . . . . . . . . . . . . . . . . . . . . . . (125,000)