Question

In Lynne Company, there was an increase in the land account during the year of $43,000. Analysis reveals that the change resulted from a cash sale of land at cost $115,000, and a cash purchase of land for $158,000. In the statement of cash flows, the change in the land account should be reported in the investment section:

A) as a net purchase of land, $43,000.
B) only as a purchase of land $158,000.
C) as a purchase of land $158,000 and a sale of land $115,000.
D) only as a sale of land $115,000.

Answer 1

In the statement of cash flows for Lynne Company, the land account changes should be reported as a separate purchase of $158,000 and sale of land for $115,000, which aligns with option C.

Step-by-step explanation:

In the Lynne Company's case, the increase in the land account can be accounted for in the statement of cash flows within the investment section. The change resulted from two separate transactions: the sale of land for cash at its cost of $115,000 and the purchase of new land for cash at $158,000. According to standard accounting practices within cash flow statements, each of these transactions should be reported separately to reflect the actual cash inflows and outflows associated with investment activities. Therefore, the correct way to report these transactions in the statement of cash flows would be option C: as a purchase of land $158,000 and a sale of land $115,000.