Final answer:
The sale of Zimmerman Company's land for the original cost results in a horizontal financial statement transaction that shows an equal increase and decrease in assets (land and cash, respectively) with no change in equity. Option 3 in the question accurately represents this with '25,000 = 25,000 + NA NA - NA = NA 25,000 FA', indicating this is a financing activity.
Step-by-step explanation:
The question about the Zimmerman Company's sale of land pertains to how this transaction would be represented in the company's horizontal financial statements. Since the land was sold for cash at the original cost, there is no gain or loss on the sale. Therefore, the correct reflection in the horizontal financial statements model would be an increase in cash and a decrease in land assets, with no change in equity because there are no profits or losses resulting from this transaction.
Option 3 correctly shows how the transaction affects the company's balance sheet model: 25,000 = 25,000 + NA NA - NA = NA 25,000 FA. This indicates that the asset increase in cash (25,000) equals the asset decrease in land (25,000) with no effect on retained earnings, leading to no change in total equity. Furthermore, this reflects a financing activity (FA) rather than an investing or operating activity since it involves the sale of an investment the company held (the land).